Chapter One

Introduction

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1.1 Background of the Study
As a part of MSCM program, I had an opportunity to study an important aspect of the
construction process which is inventory management. The study encouraged us to build our
skill towards the material management and its trigger areas.

The Opportunity to visit construction site encouraged us to correlate between the book and
practices, where the required materials are placed properly in their respective yards making it
feasible for the staff in collecting them for the proposed use and educated us that the Inventory
Management consists of a series of processes on the multiple functions with reference to the
tracking, handling and managing of goods and materials that are held in stock.

Through this platform we were not only exposed to inventory management and its database,
but also able to understand that the costs can be substantial to store and move inventory.
Innovative methods, such as Just-in-Time inventory control, can save costs and move products
and services to customers with less wait time.

The experience encouraged us to learn the tricks and traits of the inventory practices of the
developer. Thus, enabling ourselves to face the relevant challenges after the completion of
our MBA program.

1.2 Objective
In the due course of the project life cycle inventory management plays a major role in
controlling the project cost. In order to carry forward the project as scheduled and keep it
within the scheduled budget, Risk management gears up in minimizing the damage that
might cause in the project life cycle.

The purpose of inventory management is to ensure availability of materials in sufficient

quantity as and when required and also to minimise investment in inventories.
Inventory management is necessary for every management to give proper attention to
inventory management. A proper planning of purchasing, handling, storing and accounting
should form a part of inventory management. An efficient system of inventory management
will determine four vital factors.

1. What to Purchase?

2. How much to purchase?

3. From where to purchase?

4. Where to store and so on?

The purpose of inventory management is to keep the stocks in a manner that neither there
shall be over-stocking nor under-stocking. The investments in inventory should be kept in
reasonable limits so that he primary purpose shall be accomplished and it is let the work shall
not stop.

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 In the initial stage of the construction project, the organization has to plan, schedule and
implement for materials, machinery and resources required. When it comes to the materials
for a scheduled project, planning engineer and the project manager must derive the materials
required using the relevant techniques available. Lets say, the (EOQ) economic order
quantity for a particular activity can be calculated and meet the requirements.

This frame work is about the case study on the inventory and risk management in the projects
life cycle. The ABC analysis, vendor rating, selection criteria, financial comparisons through
procurement and other techniques used in controlling the project cost and its timely
completion in the ongoing project of BTI located in Hyderabad.
The main objectives of our project study are :

1. To study how inventory management practices play an important role in supporting

other activities of an organization.

2. To find out the techniques for vendor selection.

3. Applying tools and techniques of inventory classification in real life situation.

4. Finding inventory requirement at different stages of construction project or over

Project Life Cycle (PLC).

5. Study of reliable local material utilization in a construction project.

6. Stock maintenance: Practice of A class Inventories.

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Chapter Two
Company Overview

4
2.1 Company Profile
Building Technology and Ideas Ltd. (bti) established in 1984 is a pioneer Real Estate
Developer in Bangladesh. Almost three decades have passed since our humble beginnings.
All these years have been used wisely to ensure that bti grows into a leading name in this
sector.
building technology and ideas ltd. is one of the founder member of REHAB- Real Estate
Housing Association of Bangladesh and the first real estate company in Bangladesh to be
awarded with the internationally recognized ISO 9001-2000 certification for quality in
Design and Construction of Buildings . They have xpanded their operation from Dhaka to
Chittagong and plan to rapidly spread to the other major cities of Bangladesh.
To achieve professionalism in this trade that is beyond comparison; to ensure that they
remain the best in this industry; to raise the importance of customer care to a level that stays
unparalleled in this sector, they have worked very hard over the last three decades. That is
how they do business by working on strengths and overcoming weaknesses. To achieve
all of the above, they have on board a team of dedicated and highly skilled designers,
architects, engineers, planners, creative minds all working singularly towards the same
goal of creating a home where people will be happy.
At bti, the quality is of utmost importance and that is the predominant factor in the design
and construction department. As design and construction is the backbone of this business
and both of these go hand in hand, one complimenting the other, the aim is to perfect
themselves in both so as to deliver top class apartments that actual people demand.
Reality also dictates the importance of aesthetics and beauty in their lives, so delivering
apartment buildings which stand out amongst the regular and mundane surroundings in the
city, distinguishes bti from others in the real estate industry in Bangladesh. Beautiful
buildings in a variety of styles ranging from classical to contemporary dominate the radar
of bti collection.
bti like to keep up with changing times; hence though functionality and maximum
utilization of space is one of the underlying factors in all the designs, they are constantly
working towards introducing new features and facilities in all projects and backing them
with equally strong construction so that they can provide you, our customers, a safe haven
in their homes. They are also constantly working towards helping save the environment
through artistically landscaped rooftops with lush greenery, introducing features like
rainwater harvesting, encouraging the use of solar panels and offering our customers smart
choices. They encourage customers to look after the environment in whatever way they can.
In addition to the emphasis on design and construction, they are very particular about the
standard of safety in our buildings. Conforming to the new Dhaka Mohanagar Imarat
Nirman Bidhinmala 2008 and keeping environment and safety aspects in mind, a properly
designed means of fire escape staircase is ensured as a measure of safety against plausible
fire hazards.
To bolster the core values of quality and excellence, they have had on board a team of
dedicated and skilled professionals consisting of architects, engineers, designers, planners
etc. all contributing towards the growth and success of bti. It should be noted here that the
contribution of their dedicated team has enabled bti to be the first construction company of
Bangladesh to be awarded with the internationally recognized ISO 9001: 2000 certification
for quality in Design and Construction of Buildings in the year 1998.

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2.2 Mission
To make home ownership a joyful experience.

2.3 Values
Win the customer's heart.
Maintain and entrepreneurial spirit.
High moral honesty and integrity.
Work harder than everyone else and stripe to the best.
Speed of work, fight bureaucracy & remove super flows work.

Corporate Vision
We will always be the top of mind brand in the real estate industry of Bangladesh.
We will expand our operations to all the major cities in Bangladesh.
We will always try to exceed our customers expectation about the quality of our
product and our service.
We will constantly seek out new challenges and new business opportunities.
We will always strive to be the leader in all our business endeavors.
We will be responsible corporate citizens of Bangladesh and positively contribute
towards the economic growth of our country.

2.4 BTI Collection

bti categorizes their products in to two category according to their customers ability, status,
desire and demand.
The Premium Collection (Discover Ultimate Luxury)

Luxurious, extravagant & avant-garde, our 'Premium Collection' offers homes that
represent a fine blend of impeccable style and ultimate luxury that together provide you
with a five star living experience. Situated only in the most exclusive residential areas
of Dhaka & Chittagong, these lavish homes have been carefully crafted to capture the
essence of world class living with unique features.
Under premium collection bti has-
36 completed projects
18 ongoing projects
9 upcoming projects
The Classic Collection(Live in style)

Stylish, contemporary & affordable, our 'Classic Collection' offers quality homes complete
with all the features and amenities that are essential for a truly urban lifestyle. Situated in
the most accessible locations all over Dhaka & Chittagong, these apartments offer a
comfortable and practical lifestyle to the owners. The sizes of the apartments, whether large
or small, have functionality as the main theme.
Under classic collection they have:
98 completed projects

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 72 ongoing projects
30 upcoming projects
Beside these two collections bti has commercial projects also.
The Commercial Collection

Modern, efficiently designed and the place to be, bit's 'Commercial Collection' comprises
of Retail and Office spaces that create new landmarks in Bangladesh. Projects from bit's
commercial collection are located in only the most prominent areas and are being occupied
by many different brands and establishments. bit's philosophy of designing Commercial
Complexes is simple. For Office purposes, they build efficient workspaces to create a better
working environment. For Retail purposes, they design shopping malls to ensure that the
shoppers keep coming back for more!
The commercial collection has:
3 completed projects
3 ongoing projects
1 upcoming project

An additional service of bti: Group Ownership (GO)

bti has come with totally a new concept in real estate sector which is Group Ownership.
Actually the Group Ownership concept is compatible -
A chance to be one of the pioneer investors in the first of its kind venture in
Bangladesh.
A unique investment opportunity in lucrative real estate.
A vehicle to invest in prime real estate ownership for as little as Tk 10 lac.
A safe investment with the possibility of excellent returns.
A scheme conforming to Islamic principles without any element of interest earned
or paid.

The Investment opportunity in Group Ownership (GO)

As the economy of Bangladesh grows, the commercial importance of the metropolitan cities
becomes more significant because they are the engine of the countrys economic growth.
Since the independence of Bangladesh, the population of Dhaka has grown very rapidly. It
is now considered one of the mega cities of the world with a population of over 10million.
And this population is still growing rapidly as more and more people come and settle in
Dhaka looking to make their dreams come true.
The first real estate boom in Dhaka took place in the mid-eighties. Even before this boom
settled down another boom took place in the nineties which defied all logic because there
was a worldwide recession and in most major cities of the world the real estate prices were
falling. The real estate market in Dhaka was not even affected by the first Iraq war. Since
then the prices of good quality properties in Dhaka have constantly soared and still continue
to rise. In the last 9 years the prices of apartments in Gulshan have increased from tk 2000
per sft to tk 22000 per sft. Similarly in other parts of Dhaka too the prices of real estate have
increased exponentially.

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Area wise Growth Rate in Last 14 Years (2002-2016)
Combining rental income and property appreciation over a period of 14 years, good quality
real estate has given about 23% annual compounding return on investment. The Chittagong
real estate market has also shown rapid growth and this trend is expected to continue. And
now prospects in other second tier cities such as Comilla, Bogra etc are also looking bright.
Considering the safety and security of this investment, surely its attractiveness is
incomparable. It is our educated opinion that this trend of high returns on investment will
continue in the real estate market of Dhaka and Chittagong for the foreseeable future and
the second tier cities will also offer good opportunities.
Real Estate Syndicates own income generating real estate and are secured by tangible and
quantifiable assets as collateral. This characteristic is not the case in many other types of
investment and provides added security for your investment.

2.5 Sister Concerns of BTI

SICOL
SICOL- Stainless Industrial Corporation Ltd. has been manufacturing stainless steel
flatware for exporting and meeting local market demand for almost forty years. Today,
SICOL is a highly respected brand in the country and is synonymous for quality flatware.

The Design Centre Ltd.

The Design Centre is an architectural consultancy firm which deals with all the designing
needs for different companies and individuals. They also offer interior design services to
bti customers helping them create a home uniquely theirs.

bti Energy Ltd.

bti energy ltd. provides diesel power generators and offers renewable energy solutions such
as solar panels in both urban and rural areas. bti Retail Ltd.
bti is working with very excitement about their newest venture, bti retail ltd. which deals
with import, retail and distribution of consumer goods. To complement their work in the
real estate sector, bti retail ltd. will have under its purview a chain of home stores.

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2.6 SWOT Analysis
Strengths:
1. 90% people know about the brand BTI, so the awareness level about the brand BTI
and about the BTI products can be considered as strength.
2. BTI product is cost effective.
3. Timely handover the apartment.
4. BTI has a good image in the market.
5. BTI has a good product in different suitable places of the city.
6. BTI has a strong relationship among their clients and their sales representatives,
which is a good strength to increase the sales volume in the market.
7. BTI has a bulk of qualified, experienced and dedicated human resources.
8. BTI has a high quality product

Weaknesses:
1. Product price is quite higher than others.
2. Advertisement of different media is very low.
3. Very less of credit facility.
4. No frequent promotional campaign.

Opportunities:
1. 46% people know about BTI from sales person. There is a huge opportunity to
increase the market share.
2. Because of its cost effectiveness and availability, BTI product is quite popular
between the middle class. There is an opportunity to make it popular among the upper
class and upper lower middle class people.
3. The population of Bangladesh is continuously increasing at a rate of 7.3% per annum.
The countrys growing population is gradually and increasingly using Real Estate
products as a necessity.
4. More marketing initiatives can be taken to attract more customer.

Threats:
1. Lower price products are very popular.
2. The high market shares of Navana and the reliability of Navana is a threat for BTI
products.
3. There are many competitors in the market.
4. Different Govt. Policies in our country.

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CHAPTER 3
Literature Review

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Review of Related Literature and Studies
This chapter presents a brief discussion of the literature reviewed by the researchers which
further enriched the conceptualization of the study and helped in describing the cognitive
design that guided the conduct of the researcher.

Foreign Literature
Inventory Systems Summary
According to the U.S. Small Business Administration, Inventory refers to stocks of
anything necessary to do business (U.S. Small Business Administration, 2010) The U.S.
Small Business Administration publication describes what constitutes successful
inventory management balancing cost versus benefits of inventory, including Maintaining
a wide assortment without spreading the rapidly moving items too thin, Increasing
inventory turnover without sacrificing service, Keeping stock low without sacrificing
performance, Obtaining lower prices by making volume purchases, Maintaining an
adequate inventory without an excess of obsolute items.

Wal-Mart Inventory System

Wal-Mart runs its stores on a perpetual inventory system. This system records the
quantity of items sold as items are purchased. The computer system at Wal-Mart
constantly keeps up with additions or deductions from inventory and tells management
what items are on hand. The organization also conducts counts of employee manual
counts of inventory periodically. When an item arrives at the Wal-Mart distribution center
it is scanned into the inventory system. When the items are purchased by the consumer,
the point-of-sale system reduces the inventory from that purchase. According to Wal-
Marts Gail Lavielle, a leaner inventory will help clear out store clutter and help Wal-Mart
focus on specific brands and products that consumers want (The Associated Press, 2006).
(Hinsdale: Holt, Richard and Winston Sounders College Publishing, 2000)
According to Mr. Eugene F. Brigman, Fundamentals of Financial Management, 5th ed.,
Companies are increasingly employing Inventory System. A computer start with an
inventory counts in memory. Withdrawals are recorded by the computer as they are made,
and the inventory balance is constantly revised. When the recorded point is reached, the
computer automatically places an order, when this new order is received, the recorded
balance is increased. Retail stores have carried this system quite far, each item has a
magnetic codes, and as on item is checked out, it passes over an electronic reader, which
then adjusts the computers inventory balance, at the same time the price is fed to cash
register tape. When the balance drops to the recorder point, an order is place. The
researcher aim to develop a automated inventory system which is technically,
operationally, and economically. The method used by the researcher to develop a
automated inventory system is Descriptive Method. The researcher conduct several
interviews in order to gather information about the present existing conditions of the
inventory system, knowing its problems and enhancing it by developing an automated
inventory system. Questionnaires were also distributed to all interviewees for additional
information. Using the descriptive method, the researchers also observe the functionality
of the present inventory system, which help them discover that Electronic Data Processing
is Advantageous than other.
Malcolm E. White Published at 2003; Merchandising means selling products to retail
customers. Merchandisers, also called retailers, buy products from wholesalers and
manufacturers, add a mark-up or gross profit amount, and sell the products to consumers

11
at a higher price than what they paid. When you go to the mall, all the stores there are
retailers, and you are a retail customer. Retailers deal with an inventory, all the goods
(products) they have for sale. They account for inventory purchases and sales in one of
two ways. Periodic and Perpetual. As the names suggest these methods refer to how often
the inventory account balances are updated.
Source: Online Article (http://www.middlecity.com/ch06.shtml)

Companies need Inventory System

According to Eugene F. Brigman, in the book of Fundamentals of Financial Management
published at year 2000 in the publishing company of Holt, Richard and Winston Sounders
College Publishing; Companies are increasingly employing Inventory System. A
computer start with an inventory counts in memory. Withdrawals are recorded by the
computer as they are made, and the inventory balance is constantly revised. When the
recorded point is reached, the computer automatically places an order, when this new order
is received, the recorded balance is increased. Retail stores have carried this system quite
far, each item has a magnetic codes, and as on item is checked out, and it passes over an
electronic reader, which then adjusts the computers inventory balance, at the same time
the price is fed to cash register tape.

Inventory System Consist

An inventory control system is used in many warehouses to track the location, quantity,
and status of goods that are to be sold. Shipping and receiving of products is scheduled by
an inventory control system. Inventory control uses barcodes and RFID tags to track
specific items. An audit, or a physical count of inventory, is used to find out how many
items are in an inventory. Inventory taking is often required in order to get an accurate
count for accounting valuation purposes. Some inventory items have barcodes attached to
them or imprinted on them. These barcodes can be read during an audit by barcode reading
devices.
Source: Online Article (http://www.nationalbarcode.com/articles/inventory-control-
system.htm)

Steps for Inventory Management

This section of the paper looks at fundamental definitions and explanations relating to
Inventory Control, Management and Planning. Typical conflicts within the organization
that may affect inventory and what can be done to resolve and avoid these.
According to article of Dr Geoff Relph, Witek Brzeski and Gail Bradbear, published at
year 2003; A simple stock classification method is discussed that gives details about the
ABC technique, Pareto distribution and takes a look into further class level and part level
analysis. There is a worked example of an ABC classification with valuable information
about creating alternative scenarios and varying parameters for class boundaries and order
frequency per class. The results are shown in a series of statistical tables.
Source: Online Article (http://www.inventorymatters.co.uk/portfolio/the-first-steps-to-
inventory management?type=publication)

12
Advantages of Inventory System
According to KJ Henderson, they have a three major advantages by using of inventory
system these are (Time savings, Accuracy, and Consistency) which helps a lot for a
bussiness man to increase the sales of their business.

Time Savings
As the old saying goes, time is money. The amount of time that can be saved by a
business is, perhaps, the biggest benefit of using a computerized inventory system. A great
example of this benefit is the retail industry. In cases where a shop maintains all data
manually, its manager must reconcile each sales receipt with every piece of physical
inventory. Depending on the size of the establishment and how many different products
are sold, this can be a daunting and time consuming task. If that same store, however, used
a computerized point of sale, POS, system, the master inventory list would be updated
electronically each time a sale is made. The only thing a manager would have to do each
day is print out the report highlighting the inventory to be restocked.

Accuracy
An additional benefit of using a computerized inventory system is the accuracy it ensures.
Eighteenth century English poet Alexander Pope is often quoted as having said, To error
is human. When an inventory list is maintained by hand, the margin of error widens with
each update. If one mathematical calculation is wrong or one typo is made, disaster may
occur. For instance, if a clerk accidentally adds a zero to the end of a purchase order, a
business could potentially end up paying for 10,000 units of merchandise as opposed to
the 1,000 that is actually needed.

Consistency
A small business operates most efficiently when its processes are executed in a consistent
manner. By using a computerized inventory system, a business owner can ensures that all
orders, reports and other documents relating to inventory are uniform in their presentation,
regardless of who has created them. This will allow ease of reading. In addition,
uniformity creates a professional appearance, which can go a long way to impress
associates, such as potential investors.
Source: Online Article (http://smallbusiness.chron.com/benefits-using-computerized-
inventory-system-2044.html)

Disadvantages of Inventory System

According to Neil Kokemuller, by using of Inventory system they have some
disadvantages by using of this. These are (Customer Needs, Inventory Costs,
Coordination, and Risks).

Customer Needs
Balancing the goals of avoiding stock outs while minimizing inventory costs is at the heart
of just-in-time inventory. One of the main benefits of automated and efficient inventory
replenishment systems is that you can quickly respond to reduced inventory levels.
Companies are now equipped to pull back on stock in a given product category and ramp
up inventory in another as customer needs and interests change.

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Inventory Costs
Minimization of inventory management costs is a primary driver and benefit of just-in-
time practices. Inventory management has costs, and when you reduce the amount of
holding space and staff required with JIT, the company can invest the savings in business
growth and other opportunities, points out the Accounting for Management website. You
also have less likelihood of throwing out product that gets old or expires, meaning reduced
waste.

Coordination
A disadvantage of managing a just-in-time inventory system is that it requires significant
coordination between retailers and suppliers in the distribution channel. Retailers often
put major trust in suppliers by syncing their computer systems with suppliers so they can
more directly monitor inventory levels at stores or in distribution centres to initiate rapid
response to low stock levels. This usually means build-up of technology infrastructure,
which is costly. This coordinated effort is more involving on the whole than less time
intensive inventory management systems.

Risks
Just-in-time inventory is not without risks. By nature of what it is, companies using JIT
intend to walk a fine line between having too much and too little inventory. If company
buyers fail to adjust quickly to increased demand or if suppliers have distribution
problems, the business risks upsetting customers with stock outs. If buyers over
compensate and buy extra inventory to avoid stock outs, the company could experience
higher inventory costs and the potential for waste.
Source: Online Article (http://smallbusiness.chron.com/advantages-disadvantages-
justintime-inventory-21407.html)

Professional Inventory Management

According to Dr Geoff Relph, Witek Brzeski and Gail Bradbear; Inventory can be call as
Professional Inventory Management if they meet the terms; (Good Inventory, Extending
Stock Classification for Greater Control, a worked example showing the impact of moving
from 3 to 6 classes, Buffer Stock Methodology, Simple buffer stock, Stochastic buffer
stock, a worked example showing the impact of simple safety stock and stochastic safety
stock.)
Source: Online Article (http://www.inventorymatters.co.uk/portfolio/professional-
inventory-management?type=publication)

High-level Inventory Management

According to Johnson and Kaplan author of the book of Relevance Lost, (Book published
year 1997; Publishing Company, Harvard Business School Press) It seems that around
1880 there was a change in manufacturing practice from companies with relatively
homogeneous lines of products to horizontally integrated companies with unprecedented
diversity in processes and products. Those companies (especially in metalworking)
attempted to achieve success through economies of scope - the gains of jointly producing
two or more products in one facility. The managers now needed information on the effect
of product-mix decisions on overall profits and therefore needed accurate product-cost
information. A variety of attempts to achieve this were unsuccessful due to the huge

14
overhead of the information processing of the time. However, the burgeoning need for
financial reporting after 1900 created unavoidable pressure for financial accounting of
stock and the management need to cost manage products became overshadowed. In
particular, it was the need for audited accounts that sealed the fate of managerial cost
accounting. The dominance of financial reporting accounting over management
accounting remains to this day with few exceptions, and the financial reporting definitions
of 'cost' have distorted effective management 'cost' accounting since that time. This is
particularly true of inventory. Hence, high-level financial inventory has these two basic
formulas, which relate to the accounting period. (First the Cost of Beginning Inventory at
the start of the period + inventory purchases within the period + cost of production within
the period = cost of goods available. Second the Cost of goods available cost of ending
inventory at the end of the period = cost of goods sold). The benefit of these formulas is
that the first absorbs all overheads of production and raw material costs into a value of
inventory for reporting. The second formula then creates the new start point for the next
period and gives a figure to be subtracted from the sales price to determine some form of
sales-margin figure.

Manufacturing management is more interested in inventory turnover ratio or average days

to sell inventory since it tells them something about relative inventory levels. (Inventory
turnover ratio (also known as inventory turns) = cost of goods sold / Average and
Inventory = Cost of Goods Sold / ((Beginning Inventory + Ending Inventory) / 2)) and its
inverse Average Days to Sell Inventory = Number of Days a Year / Inventory Turnover
Ratio = 365 days a year / Inventory Turnover Ratio. This ratio estimates how many times
the inventory turns over a year. This number tells how much cash/goods are tied up waiting
for the process and is a critical measure of process reliability and effectiveness. So a
factory with two inventory turns has six months stock on hand, which is generally not a
good figure (depending upon the industry), whereas a factory that moves from six turns to
twelve turns has probably improved effectiveness by 100%. This improvement will have
some negative results in the financial reporting, since the 'value' now stored in the factory
as inventory is reduced.

While these accounting measures of inventory are very useful because of their simplicity,
they are also fraught with the danger of their own assumptions. There are, in fact, so many
things that can vary hidden under this appearance of simplicity that a variety of 'adjusting'
assumptions may be used. These include: (Specific Identification, Weighted Average
Cost, Moving-Average Cost, FIFO and LIFO).
Inventory Turn is a financial accounting tool for evaluating inventory and it is not
necessarily a management tool. Inventory management should be forward looking. The
methodology applied is based on historical cost of goods sold. The ratio may not be able
to reflect the usability of future production demand, as well as customer demand.
Source: Book (Relevance Lost, p. 126)

Introduction to model of the Perishable Inventory

According to the book of Timothy S. Vaughan, that published in year 1994 (Book of Book
(A model of the Perishable Inventory System with referenct to consumer-realized product
expiration; Publishing Company, Operational Research Society Ltd). The introduction of
unit perishability has significant effect on inventory policy for a large number of
commodities. A significant amount of research has been presented which addresses the

15
trade-offs between ordering, carrying, shortage, and outdate costs for perishable
inventory. A model of the perishable inventory system which incorporates the effects of
consumer-realized product expiration. This model represents a synthesis of two distinct
directions in the perishable inventory literature, and addresses the simultaneous
determination of inventory ordering and outdate policy for a perishable item with random
demand and random lifetime.
Source: Book (A model of the Perishable Inventory System with reference to consumer-
realized product expiration, Vol. 45, No. 5, p. 519)

The Advantages of a Computerized Inventory Management System

According to Bonnie Conrad, Computerized Inventory Management System give
advantage to the business like first, the Speed and Efficiency. A computerized inventory
management system makes everything from inputting information to taking inventory
easier. Doing a hand count of inventory can take days, but with a computerized inventory
management system, the same process can be done in a matter of hours. Second the
Document Generation, once the computerized inventory management system is in place,
managers and workers can use it to automatically generate all kinds of documents, from
purchase orders and checks to invoices and account statements. Managers can also use the
system to automatically order products when they run low. Third, the Timely Data with a
manual system, the data is only as accurate and up to date as the last hand count. With a
computerized inventory management system, the management team can pull a report and
instantly see how many units are on the floor, how many have sold and which products
are selling the fastest.
Source: Online Article (http://smallbusiness.chron.com/advantages-disadvantages-
computerized-inventory-management-system-22513.htmll)

Disadvantages of a Computerized Inventory Management System

According to the article of Johnson Braham if they have advantages by using of Inventory
System, they have also Disadvantages in using a computerized Inventory. First the
Reliance on Technology, with a computerized inventory management system, the
company is at the mercy of its technology. Outside factors like a power failure or the loss
of Internet or network connectivity can render the system temporarily useless. Second the
Accuracy Issues, a computerized system alone does not ensure accuracy, and the inventory
data is only as good as the data entry that created it. Companies that plan to use a
computerized inventory management system need to have a system in place to validate
their data and check the numbers reported by the system. A select hand count or targeted
audit may be necessary to ensure the integrity of the system. Third the Risk of Fraud, any
computerized system carries the risk of intrusion, and with a computerized inventory
management system comes the risk of fraud as well. A dishonest vendor could hack the
system to receive payment for products never delivered, or a dishonest employee could
redirect checks to themselves.
Source: Online Article (http://smallbusiness.chron.com/advantages-disadvantages-
computerized-inventory-management-system-22513.html)

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Types of Inventory Management Systems
According to Kenneth Hamlet they have different types of Inventory Management
systems, first the Manual which is many small business owners, especially if the business
has very few products, keep track of inventory manually. The easiest way to perform
manual inventory management is to use a spreadsheet. For example, a small bakery might
use a spreadsheet to keep track of inventory purchases and usage. The owner can also set
up the spreadsheet to calculate when ingredients need to be reordered. At the start of each
week, the owner manually counts the raw ingredients and components she has on hand.
She enters these values in the spreadsheet. She also enters her expected usage based on
existing orders. Using the appropriate spreadsheet formulas, she determines if she has
enough materials for the week or if shell need to purchase more. Manual systems allow
the small business owner to manage inventory with very little investment in systems or
training. Maintaining data integrity is a major downside to managing inventory using a
spreadsheet. A single data entry or formula error can cause major inaccuracies in the data
output. Second the Barcode, Inventory management systems that use barcode technology
increase the accuracy and efficiency of managing inventories. All major retailers use
barcode technology as part of an overall inventory management program. Barcode
technology facilitates the movement of inventory within the confines of the warehouse
(from one location to another) or from the supplier to the warehouse (receiving) and from
the warehouse to the customer (picking, packing and shipping). Third the Radio Frequency
Identification, Companies that use RFID typically move thousands of pieces of inventory
through their doors. RFID uses two types of technology to manage inventory movements-
-active and passive technology. Active RFID technology uses fixed tag readers assigned
throughout a warehouse. Anytime an item with an RFID tag passes the reader, the
movement of the item is recorded in the inventory management software. Active systems
work best in environments that require real-time inventory tracking or where inventory
security problems exist. Passive RFID technology requires the use of handheld readers to
monitor inventory movement. Just as in an active system, once an inventory items tag is
read, the movement data are transmitted to the companys inventory management
software. Because RFID technology has a reading range of up to 40 feet using passive
technology and 300 feet using active technology, it greatly increases the accuracy of
moving inventory around a warehouse.
Source: Online Article (http://smallbusiness.chron.com/types-inventory-management-
systems-2195.html)

Use of Inventory System

According to the article of Pete Abilla that published in November 16, 2011; they tackle
the different cause of using inventory system. First to Stop products from spoiling, if you
have too many products in your warehouse, you increase the risk that they will become
obsolete, damaged, spoiled or stolen before you can sell them all. Depending on which
industry youre in, youre probably more worried about some of these risks than others.
For example, if youre in the technology industry, you dont want your expensive products
to become outdated, damaged or stolen, but you probably dont care about their freshness
date. Food producers, on the other hand, put product spoilage high on the list of inventory
management concerns. Second to Stop paying hidden costs, having too much inventory
doesnt just increase your risk of paying more in the future; it costs you more money all
the time. Where will you store the extra inventory? You may need to buy a larger
warehouse than you really need or rent trailers if your warehouse isnt big enough. Plus,
you have to provide security to prevent theft. And dont forget about the money thats tied

17
up in inventory that you could have used to hire personnel or grow your business in other
ways. Third to Stop disappointing customers, on the other end of the inventory spectrum,
if you have too few products in your warehouse, you face a whole other set of risks. Your
customers dont want to wait too long to get their orders shipped to them. So if you run
out of the products theyre looking for or if your picking, packing and shipping processes
are too slow, you could drive customers away. Fourth to Stop wasting time, inventory
management can be time-consuming, especially if youre trying to do it by hand or in
Excel spreadsheets. Speed is everything in business. How fast you reorder products, ship
customer orders and update your inventory records could make or break your company.
Thats why an automated inventory management system is so important. Scanning product
barcodes and setting up automatic reorder points can save valuable time by streamlining
complex processes. Fifth the Start planning ahead, you cant afford to be purely
reactionary in your inventory management. You need to start planning ahead and being
proactive. Instead of being unprepared for sudden spikes in sales, try to notice these trends
ahead of time by monitoring social media channels for mentions of certain products and
looking at historical records to spot seasonal upticks in sales. All of this is easier said than
done. It goes back to having a powerful inventory management system to free up your
time and do most of the data analysis for you.
Source: Online Article (http://www.shmula.com/why-use-an-inventory-management-
system/9501/)

Perpetual Inventory System

According to article of Rosemary Peavler, a perpetual inventory tracking system is a
method of immediately accounting for inventory sales in the inventory account, if there is
no theft or spoilage. It is an inventory management system where store balances of
inventory are recorded after every transaction. It eliminates the need for the store to close
down constantly for inventory stock-taking as perpetual inventory systems allow for
continuous stock-taking. Perpetual inventory systems keep a running account of the
company's inventory.
Perpetual inventory systems involve more record-keeping than periodic inventory
systems. Every inventory item is kept on a separate ledger. These inventory ledgers
contain information on cost of goods sold, purchases, and inventory on hand. Perpetual
inventory management systems allow for a high degree of control of the company's
inventory by management. Perpetual inventory management is generally used by
companies who have the ability to scan the inventory items sold and who use point-of-
sale inventory systems.
Source: Online Article (http://bizfinance.about.com/od/Inventory-
Management/a/perpetual-or-periodic-inventory-which-should-your-company-use.html)

Periodic Inventory System

According to the article of Michelle Mckinley, a periodic inventory system does not
require day-to-day tracking of physical inventory. Purchases, cost of goods sold, and
inventory on hand cannot be tracked until the end of the accounting time period when a
physical inventory is performed and ending inventory is compared against the sum of
beginning inventory and purchases. Cost of ending inventory can be calculated by using
the LIFO or FIFO inventory accounting methods, or other less common methods. Periodic
inventory management allows a company to know beginning inventory and ending
inventory but it does not track inventory on a daily basis. This means there is lost

18
information. Business owners cannot tell if inventory was sold or if it was stolen, lost, or
spoiled.

If you own a start-up business without much money, periodic inventory management is
definitely better because you can get by with just a cash register and a simple accounting
procedure. If you sell services rather than products, you may not need an inventory
management system unless you own a restaurant or you are in the hospitality business. As
your business grows, you will probably want to switch over to a perpetual inventory
management system as it allows you to know the balance in your inventory account at any
point in time. Large businesses typically have perpetual inventory systems rather than
periodic inventory systems since the rest of their financial and accounting systems are
computerized.
Source: Online Article (http://bizfinance.about.com/od/Inventory-
Management/a/perpetual-or-periodic-inventory-which-should-your-company-use.html)

Local Literature
Computer-based system is a complex system wherein information technology plays a
major role. It makes the work easier, faster and more accurate. Due to that fact, the
automated scheme has become essential to small and big companies for they are expected
to give the best services possible. Nevertheless, some businesses still prefer sticking with
the system that is not integrated with technology. Probable causes are computer illiterate
staff and lack of funds. Companies, especially the big ones are recommended to switch
from manual to automated systems because this will improve the efficiency and
productivity of the business which will uplift the industrys reputation.
One of the most sought after automated systems of different companies is a purchasing
and inventory system which comes hand in hand. A purchasing and inventory system is
very important in every organization because a good purchase and inventory management
can create excellent productivity. Primarily, i6nventory work consists of input, output and
restock. Input is a process of buying new products into the inventory and replacing the old
products with the new ones. Meanwhile, output is a procedure of taking out the products
from the inventory for sales or usage and refill is a process of increasing the number of
existing products in the inventory in order to fulfill the insufficient products or escalating
demands. Most of the retailing market is using traditional way in the inventory
management system where a person is assigned to check and record the stock by hand
using pen and paper. It is where operations with regards to all the stock will be archived.
(2010, 09). Computer-Based Inventory System. StudyMode.com. Retrieved 09, 2010,
from
http://www.studymode.com/essays/Computer-Based-Inventory-System-401903.html

Lopez (1978) conducted a study on a restaurants in baguio city and found out that: 1.
Restaurants are largely sole proprietorships in organization, they are mostly owned by
Filipinos, although many others are owned by Chinese and Americans; 2. Most restaurant
personnel are male, single and predominantly high school graduates; 3. In terms of
available facil;ities and practices, the following are found: a) on service facilities, entrance
and exits are properly situated, good furniture and fixtures, parking space available, good
lighting and ventilation; b0 on control of operations, promotion of the

19
Lewis (2002) stated that the reason for using computers vary from person to person. Some
of the computers in business are to perform accuracy, to be as productivity, to decrease
bottle necks or hassles to alter cash flows or to simples elevate your status.
Sybex Inc (1999) stated that visual basic provide a graphical environment in which the
users usually designed the forms and control that become the building block of tour
application. Visual Basic support many useful tools that will help the user more
productivity.
The hardware of a POS system is also distinctive and important. A typical system includes
a display screen for the clerk, a customer display, a cash drawer, a credit card swiping
system, a printer, and a bar code scanner, along with the computer loaded with the POS
software. Custom features may be added or removed, depending on the industry. A
restaurant POS system, for example, may have a feature which prints order tickets directly
in the kitchen, or a grocery store may have an integrated scale for weighing goods.
Most small businesses underestimate the importance of managing their inventory. They
do not realize that many headaches and fire drills are caused by the lack of control and
knowledge of their inventory. Whether it is a lack of knowledge of the quantity or specs
of a certain product, businesses too frequently use outdated inventory systems.
Insufficient systems do not allow them to get the most out of their inventory, because
when used properly, inventory management systems allow businesses to make a concise,
real time analysis of products and markets that help them make better business decisions.
Inventory management systems also allow businesses to better serve their customers since
they keep a detailed and accurate record of purchase histories and trends so they can
reorder products more efficiently restaurant business was primarily through tie-ups with
travel agencies, while advertising through radio was utilized only by some establishments.
The mission of hotel and restaurant education school is to educate future workers and
leaders of the industry; however, there is a prevailing apprehension that teachers will
become too academic in their approach and lose contact with reality. Thus, there is a need
for schools to select faculty, students and curricula that produce reflective practitioners
and not scholars clark 1989.
Some define fast food restaurants as limited mean restaurants that do not have table service
(eherts and gisler, 1989). Most fast food restaurants are parts of large well known chains.
There are also small chains of just a few restaurants as well as single unit operation.
Naturally, fast food restaurant, as their name implies, serve food much faster. These
restaurants often boast of getting food to their customers in less than a minute after an
order is taken. They also have fewer choices of mean items, furthermore, fast food
restaurants, the hamburger has remained king. There are more hamburger chains
compared to any other category of fast food chains such as those that specialize in chicken,
seafood, roast beef sandwiches, Mexican food, Chinese food, pizza, spaghetti and dozens
more.
Janes (2001) stated that computers are extremely reliable device and very powerful
calculators with some great accessories applications like word processing problem for all
of business activities, regardless of size, computers have three advantages over other type
of office equipment that process information because computer are faster, more accurate
more economical.
Reyes (2005) task would be time consuming to accomplish manually and more practical
with the aid of computers field in cabinet.
Dioso (2001) stated that computer assist careful intelligent planning, organizing,
actuating and controlling. This maybe observed from the past that they monitor production

20
activities, solve scientific problem and help arrive in tentative answer to a multitude of
involve conditions.
Ralph M. Stair (1999) emphasized that the development of technology through the years
have enabled us to do more with less effort. From the orientation of the light bulb to the
industrial revolution and beyond, we have continuously tried to in a more efficient means
of doing tasks.
(2011, 11). Review of Related Foreign Literature. StudyMode.com. Retrieved 11, 2011,
from http://www.studymode.com/essays/Review-Of-Related-Foreign-Literature-
823615.html
It is without a doubt that one of the major roles played by today in almost every area in
the society particularly in business and marketing is the computerized system. This system
enables us to make very detailed work and follows accurate directives without error. This
study is prepared for the implementation of the Sales Inventory System in Borderless Hub
Philippines, Inc. located in Rm. 306-307 Pink Walters Building Quimpo Boulevard,
Davao City. In order to know the problem, we conducted an interview with the managing
team for sales, billing, and inventory. This led us to problems like the manual time-
consuming record of documents, billing errors and difficulty in data retrieval.
The basic advantages of the proposed system are to make the process fast and well-
organized which means that they can process much more quickly than humans. Data
retrieval has to be searched in lots of registers slowly and it wastes a lot of time. The
current system that the company uses is manual receipt recording. It makes the data not
reliable enough as it is hand written and there is a high probability of errors to occur. Data
recording consumes a lot of space since it is stored in cabinets and folders. It is also prone
to data loss where it could be missing because of improper file management.
Inventory is a companys merchandise, goods and materials that are contained in the store
factory at any given time. The employees need to know how many units of their products
are available for reservation and sales and the items that are sold. All of these rely on the
inventory system to present solutions. The sales inventory system would provide service
to the user, input information to the database, summarize the inquiry of bills, and manage
the product releases and storage. This would generate a faster improvisation of work given
less time and effort.
(2012, 10). Sale Inventory System. StudyMode.com. Retrieved 10, 2012, from
http://www.studymode.com/essays/Sale-Inventory-System-1117762.html
Inventory control systems maintain information about activities within firms that ensure
the delivery of products to customers. The subsystems that perform these functions include
sales, manufacturing, warehousing, ordering, and receiving. In different firms the
activities associated with each of these areas may not be strictly contained within separate
subsystems, but these functions must be performed in sequence in order to have a well-
run inventory control system.
In today's business environment, even small and mid-sized businesses have come to rely
on computerized inventory management systems. Certainly, there are plenty of small retail
outlets, manufacturers, and other businesses that continue to rely on manual means of
inventory tracking. Indeed, for some small businesses, like convenience stores, shoe
stores, or nurseries, purchase of an electronic inventory tracking system might constitute
a wasteful use of financial resources. But for other firms operating in industries that feature
high volume turnover of raw materials and/or finished products, computerized tracking
systems have emerged as a key component of business strategies aimed at increasing
productivity and maintaining competitiveness. Moreover, the recent development of

21
powerful computer programs capable of addressing a wide variety of record keeping
needsincluding inventory managementin one integrated system have also contributed
to the growing popularity of electronic inventory control options
Given such developments, it is little wonder that business experts commonly cite
inventory management as a vital element that can spell the difference between success and
failure in today's keenly competitive business world.
http://www.studymode.com/essays/Sales-And-Inventory-System-784556.html
Studies rely on information researched by the proponents. Related literature and studies
help the researcher understand the topic better because this may clarify vague points about
the problem. It also guides the proponents in making comparisons between his findings
with the findings of other similar studies. We research and gather this all information by
internet, magazines and books.
According to the article in Cleantouch Class Management System it stated that, to provide
complete computerized operations in any school. Students can be managed through Bio-
Data (GR No. Allotment), Attendance, Fees, Examination, Leaving modules. Staff records
can be computerized by Bio-Data > Staff Salary > Leaving modules. Accounting module
is integrated with all other modules to getting rid of transaction duplication.
Asen, Judith. 2008. Differential Object Marking: Iconicity 17:673-711.
According to the articles in SKG Computer Solutions it stated that, Handling this study
center/school/college very well, is very tedious task to manage. The data on registers or
maintain the database manually. Therefore, the School Management System software is
provided for you. It is errorless and appropriate version. It is the computerized system to
manage the data of studycenter/school/college.
[software.techrepublic.com.com/abstract.aspx?d,2008]
According to Eleonora Alekseykina , she stated that Reliable and fast school management
software with the great customers support. It'll help you with your daily school
management routines and deliver you from your paperwork.
[http://download.cnet.com/School-Management-System/3000-2065_4-
10538769.html,2009]
Inventory is one of the most important in monitoring a stock that take place in business
activity. The inventory system does the entire task in computing the value with inventory
(cost and quality) and handling data or information. Inventory System maintains an
orderly flow of supplies, raw materials, or finished goods through an office shop/factory
because of items in any inventory. Represents cost, they need to be controlled. The
purpose of inventory system for management are to keep inventory levels and cost at
desire minimums while maintaining to proper safeguards over materials to places and
people who need them.
Inventory review refers to the time interval between counting inventories. Periodic review
systems have a set schedule for conducting an inventory count. Transactional review
systems update the inventory count after each transaction. Periodic review is less resource
intensive but more prone to creating shortages and inventory discrepancies while
transactional review is more accurate but requires more resources.
Inventory costs can be broken into several categories: the actual cost of the inventoried
product, the cost of storage and the cost of unmet demand if inventory is not available to
fill orders. Additional costs include transportation and ordering costs incurred when
replenishing inventory. Each of these costs is unique to individual businesses and can vary
widely.
(Warren R. Planret, 2002)

22
Inventory means goods and materials, or those goods and materials themselves, held
available in stock by a business. This word is also used for a list of the contents of a
household and for a list for testamentary purposes of the possessions of someone who has
died. In accounting, inventory is considered an asset.
http://www.studymode.com/course-notes/Inventory-System-1128684.html
It is little wonder that business experts commonly cite inventory management as a vital
element that can spell the difference between success and failure in today's keenly
competitive business world. Writing in Production and Inventory Management Journal,
Godwin Udo described telecommunications technology as a critical organizational asset
that can help a company realize important competitive gains in the area of inventory
management. According to Udo, companies that make good use of this technology are far
better equipped to succeed than those who rely on outdated or unwieldy methods of
inventory control.
Automation can draidatically affect all phases of inventory management, including
counting and monitoring of inventory items; recording and retrieval of item storage
locations; recording changes to inventory; and anticipating inventory needs, including
inventory handling requirements.
http://www.studymode.com/essays/Review-Of-Related-Studies-Inventory-732920.html

Foreign Studies
Automation can draidatically affect all phases of inventory management, including
counting and monitoring of inventory items; recording and retrieval of item storage
locations; recording changes to inventory; and anticipating inventory needs, including
inventory handling requirements. Effective Inventory Analysis. Get Data Related to
Effective Inventory Analysis. For many distributors, inventory is the largest and perhaps
the most important asset. Inventory ties up more money than buildings or equipment, and
is often less liquid. It is crucial, then, that distributors develop and use a comprehensive
set of tools that allows close monitoring of the performance of inventory investments.
Read more about simple measurements that can help you maximize your investment in
inventory.
According to the study of Edwin Bello and his fellow researchers of Computerized
Monitoring and Inventory of Stock with Warning Level dated March 2005, many firms
have thousands of items of inventory which require some form of control. The usage
calculations and record keeping chores would soon become overwhelming were it not for
the computer and its unique information storage and retrieval capabilities.
http://www.studymode.com/subjects/related-studies-in-pos-page2.html (2011, 09).
Chapter Ii: Related Literature and Studies of Inventory System.StudyMode.com.
Retrieved 09, 2011, from http://www.studymode.com/essays/Chapter-Ii-Related-
Literature-And-Studies-767850.html

Local Studies
According to the study of Anna Marie Beltran Distor of Proposed Sales Monitoring
System issued 1995, the accelerated work structure of the company proper monitoring is
essential in order to keep track of the companys sales activities. Her system aims to come
up with an efficient, and accurate mechanized system of preparing invoices that will keep
trSack of the daily transaction and generate reports. Important information will be
provided by this study in order to prove that the computerization of the companys
operation and achieve a more reliable and efficient means of monitoring day to day

23
activities. Her system focuses on the analysis and design of the sales monitoring system
which will monitor the stacks inventory of the sales departments. This system of hers is
somewhat related to our study but our system focuses more on the inventory monitoring
system of a trading company.
Popular author of Accounting, Waldo T. Passion (1990) in his book stated that, to improve
their efficiency and reduce their cost of operation. Reports are more timely and accurate.
Computers have large capacity to store data and tremendous speed to manipulate and
recall data to the format a user wishes to use which the introduction of microcomputer
computation of business is more affordable.

Synthesis
The proponents believe that every literature and every studies stated in this research is
similar on the present study. The proponents relate and differentiate the research based on
the flow of their transaction from the proposed study. The transaction and process and also
the design specialization will easy help to acquire and accommodate and communicate
with the user. The proponents get and use other research in this chapter, in which it helps
to them, because they get knowledge during creating the systems.
This Review of Related Literature and Studies, illustrate the specific and general task of
the Inventory Management System, also the types of Inventory that gives a lot of
knowledge for everyone before entering into business and using Inventory. In this chapter
the proponents put a different opinion of others interms of Inventory, the Literatures and
studies should get on the Book articles on the internet.
Inventory Management system, tackled how you manage your inventory whether manual
or computerized, both of that having advantages and disadvantages for the business, this
chapter gives an idea also for the reader to review whats use of Inventory to the business.

24
 Chapter Four
Data Analysis and Interpretation of bti

25
4.1 Inventory Management Practices
Connectivity of work is predominant in any form of activity and it is proved to be a backbone
for the construction process. The case study on the ongoing construction project has hooked
up with various connections with one and other activity and the one above playing an
important role is the subject material management.

The subject is important because the project has to reap higher returns which is a challenging
task yet achievable through inventory management. Hence our primary objective is to study
how inventory management practices play an important role in supporting other activities of
an organization.

Table 5: Role of Materials Management in Various Organizational Functional Activities

Role of Material Management Description

Decision on making the material or Such a decision may be taken if:

buying. i) Supplies are not adequately
obtained successfully in the past
ii) The quality of supplied goods is not of
standard
iii) The volume requirement of sales is
exceeding the possible manufacturing
capacity iv) The material fails
in the cost analysis
The materials management needs to forecast the
Materials Forecasting requirements. Some of the questions that need to
considered for it are:
i) Is this material being needed for longtime?
ii) Will there be any requirement after 10
years for this material? Will the supplier
exist after 10 years iii) Are there any
changes or technological break- though for
this material?
iv) Are the prices going to rise in the future?

Materials planning is of the major control

Materials Planning and Budgeting activity that an organization needs to put in
place. It is feasible because of materials
management.
This will include selection of suppliers, and
Selection of Potential information sources other market research information such as price
trends, corporate environment etc. The materials
management data may help this task.

26
 Purchasing commits a lot of capital of an
organization.
Materials management information

Purchasing with a difference allows very creative purchasing by organization

as it sees most of the trends. It also helps while
purchasing in uncertain situation.

This is most essential function thus, has been

Forecasting of Price kept separately also. A good price forecasting
system based on material management and
market research information may bring an
organization into a winwin situation.
Materials management helps in the store
Store Management and inventory control functions such as: control of material being
with a difference received, proper storage, minimization of
obsolescence, highlighting of unused stocks,
ensuring good housekeeping, verification of
stock, timely delivery of goods, proper storage
and presentation of materials, dealing with scrap
materials etc.

LINKAGE WITH OTHER FUNCTIONAL AREAS OF MANAGEMENT

The Materials Management can be directly connected to the functional areas of

customer satisfaction through Total Quality Management (TQM), Human Resources
Management (HRM); environmental issues in material management, cost and finance
issues and IT related issues.

4.2 Selection of Vendors

Source selection encourages the company from the competitors through the quality of
materials supplied and by maintaining the required stock for the project.

Some important aspects in source selection:

4.2.1. Local Sources

Generally local sources are preferred, provided they meet the requirements of
the buyer in terms of quality, delivery, and price. A personal follow-up or a
local phone call is enough for effecting quicker deliveries. In fact, some
organisations prefer local suppliers even though they may not compare
favorably with outside suppliers. This local goodwill is sure to pay in the long
run. It is not uncommon to find big organisations in India encouraging ancillary
suppliers in and around their plants through technical and financial assistance.

27
4.2.2. Subcontracting
Selection of sources for subcontracting is another special issue. The
manufacturer may decide to off-load some products to suppliers so as to
facilitate scheduling of production in the plant. It also enables better utilisation
of human resources. This happens because subcontracting is just an extension
of the plants activities and since subcontractors are generally small,they may
be in need of technical assistance.

4.2.3. Choice between Small and Large Suppliers

Often in selecting suppliers, the materials manager is faced with this question.
If-the requirements are small, the small supplier is the obvious choice. A
personalised contact can be established and because he is small, he is likely to
have fewer customers, be more loyal and meet even unusual requests. Big
suppliers are equipped- to meet larger requirements. They usually have reserve
facilities and may thus be able to meet additional requirements. They may have
R & D facilities which will enable the buyer to obtain technically superior
products.

4.2.4. Sole Source versus Multiple Sources

The buyer must decide whether to place all orders with one supplier, or to give
them to two or more suppliers. Using more than one supplier has several
advantages, providing there is enough business to keep all genuinely
interested. Multiple sources provide a broader technical base. Competition is
kept alive as suppliers seek to increase their share of the business. The buyer
company is protected against failure at one suppliers plant. However, if the
policy of the buyer company to have sole sourcing for its products and supplies
wherever feasible, and this policy is implemented successfully, there is
guarantee of long-term and lasting buyer-seller relationship.

4.2.5. Inside Source

There are occasions when the buyer company may have to decide if the needed
part or component can be manufactured within its own plant, or procure it form
outside. This is known as the make-or-buy decision. The advantages and
disadvantages must be evaluated in each case in terms of the individual
companys situation.

4.2.6. Buyer-Seller Relations

Developing, establishing, and maintaining good buyer-seller relationships
must be the goal of any progressive purchasing function. It is essential that the
sellers representative is treated fairly and honestly in all transactions. When
the seller has confidence in the buyer, the buyers task can be accomplished
more effectively. When goodwill exists, negotiations are shorter, terms and
conditions are simpler to agree upon, and disputes are kept at a minimum
because of good communications. As an added bonus, the buyers company
has a better image, not merely as a customer, but as a good company to do
business with.

28
 The aim of source selection is to find the one most satisfactory source, or a
group of alternative sources with adequate and reasonably comparable
qualifications. Thus succeeding orders for the same item can be placed with
these same suppliers with confidence in the original selection. In other words,
the decision as to a source of supply contemplates a continuing and long-
lasting mutually productive relationship.

4.2.7. Loyalty to Suppliers

A continuing buyer-seller relationship, based on mutual confidence and
satisfaction, implies a policy and, a responsibility of loyalty to suppliers. This
is the antithesis of opportunism and constant shopping around in purchasing.
It is true that some cost savings can be made by such methods, but it is usually
at the sacrifice of uniformity and continuity of supply. Especially, it sacrifices
the assurance of supply that is the first responsibility in purchasing. Without
established and loyal sources of supply, every recurring requirement presents
a procurement problem of the first order, and the work of the purchasing
department is magnified beyond all reason and proportion.
Financial strength and stability of the supplier company may be essential to assure continuity
of supply and reliability of product quality. A competent buyer should be able to read and
interpret financial reports and make intelligent conclusions from the data.

Past performance provides an excellent insight into probable future success. The key to
successful analysis is to identify the important characteristics of the particular purchase.

Usually, three important factors are evaluated.

i) Quality Evaluation is simply reviewing the supplier's record in respect to meeting the
required specifications, which is measured as a percentage of acceptable shipments or
delivery. It should be the policy for the quality-control section to inform the purchasing
department of the facts concerning each shipment/delivery.
ii) Price Evaluation in its simplest form is the net price quoted in each instance for
conforming goods compared to the prices quoted by competitors. Consistency of
success and integrity in price behavior would provide a measure criterion.
iii) Service Evaluation includes prompt submission of data, response to inquiries,
delivery performance, special services rendered, and other intangibles. Most of the
elements in this factor are subjective in nature.

4.3 Tools and Techniques of Inventory

As per the inventory management theory there are various tools and techniques emerged in
order to control the material flow yet maintaining minimum stock level. In our study we
witnessed the application of tools and techniques of inventory classification in real life
situation.

A record for every work shall be carried at the site and periodic reports in the form of
electronic and paper are prepared and sent to the head office of the financial affairs and
database maintenance. This process ensures transparency in the work flow and avoids
bottlenecks in the due course of the project.

29
4.3.0 TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT AND
CONTROL

The following are the important tools and technique of inventory management and control.

4.3.1. Determination of stock levels.

4.3.2. Determination of safety stocks.

4.3.3. Selecting a proper system of ordering for inventory.

4.3.4. Determination of economic order quantity(EOQ).

4.3.5. A.B.C. Analysis.

4.3.6. V.E.D. Analysis.

4.3.7. Inventory turnover ratios.

4.3.8. Classification and codification of

inventories 4.3.9. Preparation of inventory reports.

4.3.1. Determination of stock levels:

Carrying of too much and too little of inventories is detrimental to the firm. If the
inventory level is too little, the firm will face frequent stock-outs involving heavy
ordering cost and if the inventory level is too high it will be unnecessary tie-up of
capital. Therefore, an affective inventory management requires that a firm should
maintain an optimum level of inventory where inventory costs are the minimum and
at the same time there is no stock-out which may result in lost of sale or stoppage of
production. Various stock levels are discussed as such.

4.3.1.1. Minimum Level: This represents the quality which must be maintained in hand
at all times. If stocks are less than the minimum level then the work will stop due to
shortage of materials.

Following factors are taken into account while fixing

i. Lead Time: The time taken in processing the order and then executing it is
known as lead time. It is essential to maintain some inventory during the period.
ii. Rate of Consumption: It is the average consumption of material in the factory.
iii. Nature of Material: If a material is required only against special orders of the
customer than minimum stock will not be required for such materials. Minimum
stock level can be calculated with the help of following formula:

30
 Minimum stock level = Re-ordering level (Normal consumption) Normal Re-
order period)

4.3.1.2. Re-ordering Level: Re-ordering level or ordering level is fixed between

minimum level and maximum level. Re-ordering level is fixed with the following
formula:

Re-ordering Level = Maximum Consumption Maximum Re-order period.

4.3.1.3. Maximum Level: It is the quantity of material beyond which a firm should not
exceed its stocks. If the quantity exceeds maximum level limit then it will be
overstocking. A firm should avoid overstocking because it will result in high material
costs. Overstocking will mean blocking of more working capital, more space for
storing the materials, more wastage of materials and more chances of losses from
obsolescence.

Maximum Stock Level = Re-ordering Level + Re-ordering Quantity

(Minimum Consumption Minimum Re-ordering period).

4.3.1.4. Danger Level: It is the level beyond which materials should not fall in any case.
If danger level arises then immediate steps should be taken to replenish the stocks even
if more cost is incurred in arranging the materials. If materials are not arranged
immediately there is a possibility of stoppage of work. Danger level is determined with
the following formula:

Danger Level = Average Consumption Maximum re-order period for

emergency purchases.

4.3.1.5. Average Stocks Level: The average stock level is calculated as such:

Average Stock Level = Minimum Stock Level + of re-order quantity.

4.3.2. Determination of Safety Stocks

Safety stock is a buffer to meet some unanticipated increase in usage. The usage of
inventory cannot be perfectly forecasted. It fluctuates over a period of time. The
demand for materials may fluctuate and delivery of inventory may also be delayed and
in such a situation the firm can face a problem of stock-out. The stock-out can prove
costly by affecting the smooth working of the concern. In order to protect against the
stock out arising out of usage fluctuations, firms usually maintain some margin of
safety or safety stocks. The basic problem is to determine the level of quantity of safety
stocks. Two costs are involved in the determination of this stock i.e. opportunity cost
of stock-outs and the carrying costs. The stock outs of raw materials cause production
disruption resulting into higher cost of production. Similarly, the stock-out of finished
goods result into the failure of the firm in competition as the firm cannot provide
customer service. If a firm maintain low level of safety frequent stock-outs will occur

31
 resulting into the large opportunity costs. On the other hand, the larger quantities of
safety stocks involve higher carrying costs.

4.3.3. Ordering systems of Inventory

The basic problem of inventory is to decide the re-order point. This point indicates
when an order should be placed. The re-order point is determined with the help of
these things: (a) average consumption rate, (b) duration of lead time, (c) economic
order quantity, when the inventory is depleted to lead time consumption, the order
should be placed. There are three prevalent system of ordering and a concern can
choose any one of these:

a) Fixed order quantity system generally known as economic order quantity (EOQ)
system.
b) Fixed period order system or periodic re-ordering system or periodic review
system.
c) Single order and schedule part delivery system.

4.3.4. Economic Order Quantity (EOQ)

Economic order quantity is the size of the lot to be purchased which is economically
viable. This is the quantity of materials which can be purchased at minimum costs.
Generally, economic order quantity is the point at which inventory carrying costs are
equal to order costs. In determining economic order quantity it is assumed that cost of
managing inventory is made up solely of two parts i.e., ordering costs and carrying
costs.

4.3.4.1. Ordering costs: These are the costs which are associated with the purchasing or
ordering of materials. These costs include:

a. Costs of staff posted for ordering of goods. A purchase order is processed and then
placed with suppliers. The labour spent on this process is included in ordering
costs.
b. Expenses incurred on transportation of goods purchased.
c. Inspection costs of incoming materials.
d. Cost of stationery, typing, postage, telephone charges, etc.

These costs are also known as buying costs and will arise only when some purchases are
made.
When materials are manufactured in the concern then these costs will be known as set-up
costs. These costs will include costs of setting up machinery for manufacturing materials,
time taken up in setting, cost of tools, etc.

The ordering costs are totaled up for the year and then divided by the number of orders
placed each year.

32
4.3.4.2. Carrying Costs: These are the costs of holding the inventories. These costs will not
be incurred if inventories are not carried. These costs include:

a. The cost of capital invested in inventories. An interest will be paid on the amount
of capital locked-up in inventories.
b. Cost of storage which could have been used for other purpose.
c. The cost of materials due to deterioration and obsolescence. The materials may
deteriorate with passage of time. The loss of obsolescence arises when the
materials in stock are not usable because of change in process or product.
d. Insurance cost.
e. Cost of spoilage in handling of materials.

The longer the materials kept in stocks, the costlier it becomes by 20 percent every year.
The ordering and carrying costs have a reverse relationship. The ordering cost goes up
with the increase in number of orders placed. On with the increase in number of units,
purchased and stored..
The ordering and carrying costs of materials being high, an effort should be made to
minimise these costs. The quantity to be ordered should be large so that economy may be
made in transport costs and discounts may also be earned. On the other hand, storing
facilities, capital to be locked up, insurance costs should also be taken into account.

4.3.4.3. Assumptions of EOQ: While calculating EOQ the following assumptions are made.

a. The supply of goods is satisfactory. The goods can be purchased whenever these
are needed.

b. The quantity to be purchased by the concern is certain.

c. The prices of goods are stable. It results in stabilising carrying costs.

When above-mentioned conditions are satisfied, economic order quantity can be

calculated with the help of the following formula:

2S
EOQ=
I
Where

A = Annual consumption in rupees.

S = Cost of placing an order.

I = Inventory carrying costs of one unit.

33
4.3.4.4. EOQ and Quality Discount: Customer is offered some discount for bulk purchase
or if the size of a single order is large. Thus, the price per unit of an item may decrease for
buying larger quantities. The quantity discount affects inventory cost in three ways:

a. As the price per unit is reduced, the total price for the lot is reduced.
b. The lot size is increased, the number of offers is reduced and as a result the total
ordering cost is reduced.
c. The average inventory holding increase and as a result the storage cost will
increase.
Thus, to decide whether to avail the quantity discount or not, first of all EOQ is
determined and then its total cost without quantity discount and with quantity
discount is determined. In case, the total cost is less due to quantity discount the offer
is accepted, other wise it is rejected. The following example illustrates the point.

4.3.1.5. A-B-C Analysis

The materials are divided into a number of categories for adopting a selective approach
for material control. Under A-B-C analysis, the materials are divided into three
categories viz, A, B and C. Past experience has shown that almost 10 percent of the
items contribute to 70 percent of value of consumption and this category is called A
Category. About 20 percent of the items contribute about 20 percent of value of
consumption and this is known as category B materials. Category C covers about
70 percent of items of materials which contribute only 10 percent of value of
consumption. There may be some variation in different organisations and an
adjustment can be made in these percentages.

Class No. of Items % Value of Items %

A 10 70
B 20 20
C 70 10

A-B-C analysis helps to concentrate more efforts on category A since greatest monetary
advantage will come by controlling these items. An intention should be paid in estimating
requirements, purchasing, maintaining safety stocks and properly storing of A category
materials. These items are kept under a constant review so that a substantial material cost
may be controlled. The control C items may be relaxed and these stocks may be
purchased for the year. A little more attention should be given towards "B" category items
and their purchase should be undertaken at quarterly or half-yearly intervals.

34
4.3.1.6. VED Analysis

The VED analysis is used generally for spare parts. Spare parts are classified as Vital
(V), Essential (E) and Desirable (D). The vital spares are a must for running the
concern smoothly and these must be stored adequately. The non-availability of vital
spare will cause havoc in the concern. The E types of spares are also necessary but
their stocks may be kept at low figures. The stocking of D type of spares may be
avoided at times. If the lead time of these spares is less, then stocking of these spares
can be avoided. The classification of spares under three categories is an important
decision. The classification of spares should be left to the technical staff because they
know the need urgency and use of these spares.

4.3.1.7. Inventory Turnover Ratios

Inventory turnover ratios are calculated to indicate whether inventories have been used
efficiently or not. The purpose is to ensure the blocking of only required minimum
funds in inventory. The inventory turnover ratio also known as stock velocity is
normally calculated as sales/average inventory or cost of goods sold/average inventory
cost. Inventory conversion period may also be calculated to find the average time taken
for clearing the stocks.

Costof Good Sold Net Sales

Inventory Turnover Ratio
Average Inventory at Cost (Average) Inventory

4.3.1.8. Classification and Codification of Inventories

The inventories of a manufacturing concern may consist of raw materials, work in

process, finished goods, spares, consumable stocks, etc. All these categories may have
their subdivisions. The raw materials used may be of 3-4 types, finished goods may
also be of more than one type, spares may be of a number of types and so on. For a
proper recording and control of inventory, a proper classification of various types of
items is essential. The inventories should first be classified and then code numbers
should be assigned for their identification.

The identification of short names are useful for inventory management not only for
large concerns but also for small concerns. Lack of proper classification may also lead
to reduction in production. Generally, material are classified according to their nature
such as construction materials, consumable stocks, spares, lubricants, etc. The coding
class of materials is assigned two digits and then two or three digits are assigned to the
category of materials in that class. The third distinction is needed for the quality of
goods and decimals are used to note this factor.
4.3.1.9. Inventory Reports

From effective control, the management should be kept informed with the latest stock
position of different items. This is usually done by preparing periodical inventory
reports. These reports should contain all information necessary for managerial action.
On the basis of these reports management takes corrective action wherever necessary.

35
 The more frequently these reports are prepared the less will be the chances of lapse in
the administration of inventories.

4.4 Determine inventory requirement at different stages of construction

project i.e. over Project Life Cycle.

In this case study, we determine the inventory requirement for one villa at different stages of
construction project. The Activity breakup is mentioned below which show the project
completion with respect to time.
Project Activity Breakup

Project Completion

%
S.No Description of work
1 Footings 3.4
2 Plinth Beam 6.9
3 G.F Slab 10.3
4 F.F Slab 13.8
5 S.F Slab 17.2
6 G.F Brick Work 20.7
7 F.F Brick Work 24.1
8 Internal Plastering 27.6
9 External Plastering With Elevations 31.0
10 Elevation Cladding 34.5
11 Sloped Roof Tiles 37.9
12 Toilets cladding 41.4

13 Flooring 44.8

14 StaircaseGranite 48.3

15 Luppam Internal (2 Coats) 51.7

16 Paper Coat & Primary 55.2

17 External primary 58.6

36
18 Fenesta Windows 62.1

19 Main Door Shutter 65.5

20 Door Shutters Fixing 69.0

21 Grills Fixing 72.4

22 Electrical Wiring 75.9

23 Electrical Switches Fixing 79.3

24 Internal Painting (1st Coat) 82.8

25 Internal Painting (2nd Coat) 86.2

26 Doors Polishing 89.7

27 Staircase Railing With Polish and Glass Fixing 93.1

28 Plumbing Final Fittings 96.6

29 Parking Tiles 100.0

Table 6: Table showing Project Activity Breakup w.r.t time.

The following Inventory are required to construct one villa in the maple
town project.
S.No Description QTY UNITS

4.4.1.0 Footing

4.4.1.1 PCC 5.25 Cum

4.4.1.2 RCC 11.6 Cum

4.4.1.3 STEEL 301 Kgs

4.4.2.0 Plinth Beam

37
4.4.2.1. PCC 3.75 Cum

4.4.2.2 R.C.C 7.5 Cum

4.4.2.3 STEEL 1626 Kgs

4.4.3.0 Ground Floor

4.4.3.1 Columns RCC 3.75 Cum

4.4.3.2 Steel 655 Kgs

4.4.3.3 Slab RCC 22.5 Cum

4.4.3.4 Steel 2080 Kgs

4.4.4.0 First Floor

4.4.4.1 Column RCC 3.1 Cum

4.4.4.2 Steel 515 Kgs

4.4.4.3 Slab RCC 20.75 Cum

4.4.4.4 Steel 1939 Kgs

4.4.5.0 Staircase

4.4.5.1 GF RCC 1.0 Cum

4.4.5.2 Steel 188.0

4.4.5.3 FF RCC 1.0 Cum

4.4.5.4 Steel 198.0

4.4.6.0 Brick Work

4.4.6.1 G.F 4" 186 Cum ft

38
 4.4.6.2 9" 1305 Cum ft

4.4.6.3 F.F. 4" 210 Cum ft

4.4.6.4 9" 1040 Cum ft

4.4.6.5 S.F 4" 25 Cum ft

4.4.6.6 9" 755 Cum ft

4.4.7.0 PLASTERING
4.4.7.1 Internal Plastering Sft
4.4.7.2 GF 4380.64 Sft
4.4.7.3 FF 3150.97 Sft
4.4.7.4 SF 1043.10 Sft
4.4.7.5 Ceiling Plastering Sft
4.4.7.6 GF 1423.00 Sft
4.4.7.7 FF 1361.83 Sft
4.4.7.8 SF 438.25 Sft
4.4.7.9 External Plastering Sft
4.4.7.10 GF 1255.16 Sft
4.4.7.11 FF 1508.75 Sft
4.4.8.PLUMBING REQUIREMENT

S.NO DESCRIPTION OF ITEM Qty UNIT

1 European Water Closet (Floor Mounted) 5 NO's

2 Cisteran 5 NO's
3 Angle Vale 14 NO's
4 Wash Basin 4 NO's
5 Bottle Trap 4 NO's
6 Wash Basin Waste Coupling 4 NO's
7 Pillar Cock 4 NO's

39
8 Wall Mixer & Shower arm With Wall Flange 4 SET
9 Long Body Swinging Spout(Sink) 2 NO's
10 Sink With Drain Bord & West coupling,Bottle Trap 1 NO's
11 Bibcock With Wall Flange 5 NO's
12 CP Towel Rail of 20mm Dia 4 NO's
13 Soap Dish 5 NO's
14 Health Faucet set 5 NO's
15 Towel Ring of 150mm Dia 5 NO's
16 1520(L)X730(W)X465(W)CM Bath tub Spout with Popup waste 1 NO's
17 Mirror Of Size 650x450mm 4 NO's
19 Stone Ware Glagzed Pipes 150mm Dia 40 MTR
20 CI 100mm Anti Cock Roach Nahani trap with `P' Trap Type 11 NO's
21 Gully Trap 5 NO's
22 40mm dia(Sink Drain pipe) 2 MTR
23 32mm dIa(wash Basin Drain Pipe) 13 MTR
24 Sand Cast Iron (Balck) pipes 100mm Dia 28 MTR
25 Sand Cast Iron (Balck) pipes 75 mm Dia 50 MTR
26 PVC SWR Pipes 110mm 18 MTR
27 PVC SWR Pipes 50 mm 7 MTR
28 CPVC 3/4" Dia pipe 90 MTR
29 CPVC 1/2" Dia Pipe 30 MTR

30 CPVC 1"Dia Pipe 5 MTR

31 G.i Pipe 3/4" 5 MTR
32 G.i Pipe 1 1/4 28 MTR
33 G.i Pipe 1 1/2" 6 MTR
34 Non Return Vale 3/4" 3 NO's
35 Angular Stop Cock With Wall Flange 6 NO's
36 Geysers 25 Liters 3 NO's
37 GM Ball Vale 1" 2 NO's
GM Ball valve 3/4" 6 NO's

40
38 CPVC 1/2" Elbow 90 (Brass) 30 NO's
39 CPVC 1/2" Threaded End Plug 30 NO's
40 CPVC Step Over Bend 1/2" 8 NO's
41 CPVC 90 Elbow 3/4"X 1/2"(Reducer) 8 NO's
42 CPVC Reducer Tee(3/4"x1/2"x3/4) 21 NO's
43 CPVC Reducer Tee(1"x1/2"x3/4) 1 NO's
44 CPVC 1/2" Socket 6 NO's
45 CPVC 3/4"X1/2" Reducer Elbow 90 (Brass) 3 NO's
46 CPVC 3/4" Elbow 90 10 NO's
47 CPVC 3/4" Socket 10 NO's
48 CPVC 3/4" Tee 5 NO's
49 CPVC 1" Tee 1 NO's
50 CPVC 1" Elbow 2 NO's
51 CPVC 1"Socket 2 NO's
52 CPVC 1"X 3/4" Reducer Socket 1 NO's
53 G.i 11/4" Elbow 2 NO's
54 G.i 11/4" X 1" Reducer Tee 1 NO's
55 G.i 11/4"X 3/4 " Reducer Tee 4 NO's
56 G.i 11/4" Socket 3 NO's
57 G.i 11/2"X1 1/4" Reducer Socket 1 NO's
58 G.i 11/2" Elbow 2 NO's
59 G.i 11/2" Socket 2 NO's
60 G.i 3/4" Elbow 6 NO's
61 G.i 3/4 Socket 4 NO's
62 G.i1/2 Dum Nut 3 NO's
63 G.i 3/4X1/2 Reducer Elbow 3 NO's
64 PVC 40mm 90 Elbow 1 NO's
65 PVC 40mm 45Elbow 2 NO's
66 40mm X32mm Bush 1 NO's
67 PVC 32mm 90 Elbow 10 NO's

41
68 PVC 32mm 45 Elbow 8 NO's
69 PVC 32mm Socket 5 NO's
70 PVC 110mm Elbow 6 NO's
71 C.I 100mmTee With Door 3 NO's
72 PVC 50 Elbow 90 2 NO's
73 C.I 100mm Bend 90 5 NO's
74 C.I 100mm Socket 3 NO's
75 C.I 100mm 90 Bend With Door 2 NO's
76 C.I 100mm Cowl 2 NO's
77 C.I 75mm Cowl 4 NO's
78 C.I 75mm 90 Bend 4 NO's
79 C.I 75mm 90 Tee With Door 4 NO's
80 C.I 75mm 45 Bend 3 NO's
81 C.I 75mm Plain `y' 1 NO's
82 C.I 75mm With Door 3 NO's
83 Shellac(or)Hold Tight 1 KGs
84 Dori 15 NO's
85 Spunyarn 7 NO's
86 Taflone Tape 25 NO's
87 PVC Solvet Cement 1.5 Litre
88 CPVC Solvent Cemnt 3 Litre
89 Indian Water Closet 0
Set
90 Cistern 0
91 GM gate valve3/4" dia (screwed end) 1 NO's
92 GM gate valve1 1/4"mm dia(screwed end) 1 NO's
93 GM gate valve1 1/2"mm dia(screwed end) 1 NO's
94 CPVC 1"X 3/4" Bushing 1 NO's
95 40mm Pipe -6kgf/cm2 6mt length 2.5 NO's
96 PVC 110mm Socket 1 NO's
97 110mm GI Clamps 8 NO's

42
98 50mm GI Clamps 3 NO's

4.4.9. FLOORING QUANTITIES

S.No Description Size Qty Unit

1 Vitrified porcelain tile 2737 Sft

2 Vitrified porcelain tile Skirting 826 Rft

3 Ceramic non skid floor tiles 8"x8" 211 Sft

4 Dadoing with Glazed Tiles 4"x8" 920 Sft

5 Granite slab (For Stair Case) 12"x24" 230 Sft

6 Cement paved Tiles 60 Sft

7 Interlock tiles 540 Sft

8 Granite platform in kitchen 58 Sft

9 Roof Tiles 780 Sft

10 Banglore stone Cladding 210 Sft

4.4.10. RAILINGS

S.no Description Total Qty Unit

1 MS Stair Case Railing 156 Kgs

2 Window Grills 496 Kgs

3 Elevation Railings 176 Kgs

4 Painting 624 Sft

4.4.11.DOORS AND WINDOWS

S.No Description Qty Unit

Providing and Fixing Teak Wood Frame and teak wood

1 glazed shutter 4.88 Sqm

Providing and Fixing Teak Wood Frame and Flush

2 shutter 22.28 Sqm

43
 3 Windows with Glass Shutters 43.68 Sqm

4.4.12.PAINTING QUANTITIES
S.No Description Qty Units

1 Internal 8574.70 SFT

2 Ceiling 3223.08 SFT

3 External 4924.07 SFT

4.4.13.ELECTRICAL QUANTITIES
QUANTITY
S.No Description Unit GF FF Total
ELECTRICAL REQURIMENTS ONLY FOR SLAB
1 Pvc Conduit Of 25Mm Dia With 2Mm Thick Ft 800 600 1400
2 Fan Hook Boxes Nos 6 7 13
3 Deep Boxes Nos 20 25 45
4 25Mm Pvc Long Bend S Nos 70 45 115
5 End Clousers Nos 50 50 100

ELECTRICAL REQURIMENTS ONLY FOR WALLS

1 Pvc Conduit Of 25Mm Dia With 1.5Mm Thick Ft 500 450 950
2 25 Mm Juntion Boxes Nos 30 30 60
3 25Mm Pvc Long Bends Nos 35 35 70
4 Pvc Conduit Of 19Mm Dia With 1.5Mm Thick Ft 150 150 300
5 19 Mm Juntion Boxes Nos 25 25 50
6 19Mm Pvc Long Bends Nos 25 25 50

ELECTRICAL ITEMS Unit QUANTITY

1 5 A Switches Nos 63
2 5 A Socket(2 in 1) Nos 20
3 15 A Socket Nos 15
4 15 A Switches Nos 15
5 Inter Comm Jack Nos 1

44
 6 Fan Regulator Nos 11
7 TV Socket Nos 6
8 TelePhone Jack Nos 7
9 Computer Jack(Internet) Nos 1
10 5 A 2 Way Switches Nos 22
11 Angle Holders Nos 25
12 Bottom Holders Nos 10
13 Ceiling Roses Nos 26
14 Foot Lamp Nos 5
15 Round Sheet Nos 70
16 Fan Round Sheet Nos 12
17 6 Way TPN DB Nos 2
18 40 A 100 mA 4 Pole Isolation Nos 2
19 6 A SP MCB Nos 18
20 20 A SP MCB Nos 8
21 16 A SP MCB Nos 19

4.4.14. EXTERNAL WORKS

S.No Description Qty Unit

1 Roads 230246 Sft

2 KerbStones 18000 Rft

3 Landscape 160798 Sft

4 STP LS

5 WTP LS

6 Pneumatic System LS

7 External Electrification LS

8 External Sewage System LS

9 Communications LS

10 Central Gas System LS

11 ClubHouse 16115 Sft

45
 12 Compound Wall 6400 Rft

13 Solar Fencing 6400 Rft

14 Entrance Gate LS

Table 7: Above Tables showing the Quantity required for construction of one villa at maple town project

4.5. Stock maintenance & Analysis of "A" class Inventories.

The main objective of this project is to overcome the work load and time consumption which
makes the maintenance of the stock in an organization as a tedious process.

In this Case study we have taken the Cement Item as A class inventory and did the Stock
Maintenance analysis from 01/01/2008 to 31/12/2008.

Cement Consumption and Re-order Date From 01/01/2008 to 31/12/2008

Total Consu Min. Total
S.N order mption Balanc
From To Order Date Stock
o qty Qty e
Level
Opening Balance as on 01-01-08 1389
1 1-Jan-2008 15-Jan-2008 4-Jan-2008 3590 3689 1290 4979
2 16-Jan-2008 30-Jan-2008 17-Jan-2008 2520 2498 1312 3810
3 1-Feb-2008 14-Feb-2008 2-Feb-2008 5400 5100 1612 6712
4 15-Feb-2008 29-Feb-2008 19-Feb-2008 3600 4005 1207 5212
5 1-Mar-2008 15-Mar-2008 3-Mar-2008 5726 5800 1133 6933
6 16-Mar-2008 31-Mar-2008 15-Mar-2008 4320 4300 1153 5453
7 1-Apr-2008 14-Apr-2008 4-Apr-2008 6,840 6608 1,385 7993
8 15-Apr-2008 30-Apr-2008 22-Apr-2008 3600 4054 931 4985
9 1-May-2008 14-May-2008 5-May-2008 5400 5562 769 6331
10 15-May-2008 31-May-2008 19-May-2008 5760 5506 1023 6529
11 1-Jun-2008 14-Jun-2008 6-Jun-2008 3600 3595 1028 4623
12 15-Jun-2008 30-Jun-2008 18-Jun-2008 6470 6343 1155 7498
13 1-Jul-2008 15-Jul-2008 7-Jul-2008 3597 3097 1655 4752
14 16-Jul-2008 31-Jul-2008 17-Jul-2008 4120 5000 775 5775
15 1-Aug-2008 15-Aug-3008 8-Aug-2008 2880 2088 1567 3655
16 16-Aug-2008 30-Aug-2008 22-Aug-2008 2160 2560 1167 3727
17 1-Sep-2008 15-Sep-2008 9-Sep-2008 3240 3200 1207 4407

46
18 16-Sep-2008 30-Sep-2008 23-Sep-2008 2880 3406 681 4087
19 1-Oct-2008 15-Oct-2008 10-Oct-2008 3240 3040 881 3921
20 16-Oct-2008 31-Oct-2008 24-Oct-2008 3959 4090 750 4840
21 1-Nov-2008 15-Nov-2008 9-Nov-2008 5680 5800 630 6430
22 16-Nov-2008 30-Nov-2008 19-Nov-2008 4500 3890 1240 5130
23 1-Dec-2008 15-Dec-2008 12-Dec-2008 3600 3801 1039 4840
24 16-Dec-2008 31-Dec-2008 24-Dec-2008 3600 3540 1099 4639
Table 13: showing the Cement consumption & Order Qty from 01/2008 to 12/2008.

The graphical representation of our analysis is a result of the work we carried through our
project. It emphasizes the trigger points, the points which help the staff in charge to create an
order for the material so that the work shall not stop.

Figure 1 : showing the Consumption from 01/01/2008 to 30/06/2008

Figure 2: showing the Consumption from 01/07/2012 to 31/12/2014

47
In this Case study, Re-order Level is set to 1200 bags and Safety Stock level is set to 800 bags,
Daily consumption in this project is appx. 200 bags per day, so they have taken 4 days required
quantity in hands to avoid the work delay.

Henceforth, the company is ordering the Cement on an average for every fortnight.
The quantity of cement is ordered on an average is about 4000 bags for every fortnight. Safety
stock can be utilized as a strategic tool until the company can judge how accurate their forecast
is after the first few years.

The amount of safety stock an organization chooses to keep on hand can dramatically affect
their business. Too much safety stock can result in high holding costs of inventory. In addition,
products which are stored for too long a time can spoil, expire, or break during the warehousing
process. Too little safety stock can result in lost sales and, thus, a higher rate of customer
turnover. As a result, finding the right balance between too much and too little safety stock is
essential.

48
 Chapter Five
Conclusion & Recommendations

49
CONCLUSION

Inventory management is important for keeping costs down, while meeting regulations. Supply
and demand is a delicate balance, and inventory management hopes to ensure that the balance
is undisturbed. Highly trained inventory managers and high-quality software will help make
inventory management a success. The ROI (return of investment) of inventory management
will be seen in the forms of increased revenue and profits, positive employee atmosphere, and
an overall increase of customer satisfaction.

As per the case study on the construction firm on a particular segment, it is clear that developer
must adopt all the available and known technologies and quantitative analysis in association
with various software's in order to achieve higher profits. Also, the materials flow throughout
the activities has a controlled behavior and there is a very significant usage of the local source
and reliable firms. Every move towards the inventory management clearly educates that the
work shall go on.
It has been concluded that the developer shall emphasize on single vendor who is empowered
with multiple quality materials, this has to be practice at the construction project in order to
bring down Material Cost, Transportation Cost. It enhances Company profits and minimizes
the project duration.

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 Recommendations
1. Developers has to concentrate on the renewable source of energy at the construction
phase as in the solar panels around the structure would replace the Hydel source. The
renewable source reduces the cost of materials such as steel, bricks and concrete. Thus,
reducing their usage in the process. To elaborate, there shall be majority of space for
solar panels instead of walls and ceiling area. The space shall be replaced by the solar
walls and solar ceiling therefore molding the structure to meet green building norms.
2. There shall be continuous improvements in the construction process in terms of its
materials usage or others. Let's consider steel for the matter of fact, it is now available
in the customized form. Vendors are now focusing on the customer's requirement in
order to enhance their sales and to overcome competition in the market, the apparent
change lead to the customized cut of steel as per the drawings, because the facility
would cut the reconciliation process and rolling margin.

Positive stroke
The solar concept would enhance the aesthetic appearance of the building and the facility
encourages green building concept.

The customized steel minimizes wastages and increases profits.

MATERIALS MANAGEMENT AND ITS FUNCTIONS

Materials can be put in three categories. First category is purchased materials like the raw
materials, components, spare parts and items that are used and do not appear in the end product.
The second category is of in-process materials or the materials in the semi-finished stages and
lastly the finished goods that are ready for customers. One has to manage these materials. The
aim of this management is to obtain the materials at the minimum possible price while
maintaining quality also and to maintain the inventories in such a way that minimum cost is
incurred while maintaining adequate materials for the production process.

The functions of the materials management are materials planning and control, purchasing,
inventory control, store keeping, material handling, warehousing, standardization &
simplification and organization & appraisal of materials. This course has been designed in such
a manner so that you get a feel of these functions in the subsequent blocks.

1. Materials planning and control: Material requirement lies at the core of successful
material management. This function is at the core of all the material requirements in
any manufacturing process.
2. Purchasing: This function identifies the sources of supply, does market research, call
tenders and select suppliers, negotiate with them and thus make available the raw
materials.

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 3. Inventory control: This function is responsible for the location and storage of materials
so that they remain available at the minimum cost and quickest time.
4. Store keeping: This function is responsible for the receipt and issue of the materials.
The materials
5. Material handling: This function aims at minimizing handling and provision of
equipments for handling materials. This function is crucial for minimizing space
requirements, effective distribution and for providing better working space.
6. Warehousing: This function is responsible for the storage facilities for the materials,
weighing facilities, materials handling equipments, material distribution facilities, fire
fighting instruments etc.
7. Standardization and simplification: This function selects items of great demand and
sets the standards for quality, raw material, sizes and performance of any product.
8. Organization & appraisal of materials: This function helps in effective functioning
by proving smooth flow. It provides coordination and avoid delays and wastages

Materials Management & Management of Flow of Materials

In any organization, the responsibility for maintaining the quality of the product and incurring
less cost on its production is the responsibility of the production/ operation, deciding the price
of the product and finding the customers that will buy it comes under marketing. The question
arises that if it is so, what do the materials management function does? The answer is that from
the time the materials enter the warehouse of the organization from the suppliers, the role of
materials management starts and gets going till the final product is obtained. The interrelated
activities that are carried out to achieve this are sequenced after each other in a systematic
manner. Management of this flow of materials is called materials management. This flow of
materials is met through a set of activities presented in Table 1.2 given below

Table 14: Set of activities for flow of materials

S.No Activity Function
Planning Setting the goals, indicating the sources of finance
1
Scheduling Requirements specification, quantum and delivery
2 schedules
Purchasing and Vendor selection, vendor contracts
3 Procurement
Inspection and Conforming quality
4 Quality control
Stores and Inventory Determining inventories, maintenance and upkeep
5 control
Materials handling and Controlling flows, distribution, shipments
6 distribution
logistics

The table above highlights the importance of integrated systems and dependence of function
models for decision-making. The organizations have now become multidimensional in nature.

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Total materials management concept evolved to address this dimension and avoid conflicting
objectives. Total material management helps in establishing accountability so that response to
a problem is quick and appropriate.
The material functions are accomplished in more coordinated ways with the help of this
integrated approach. When this happens there is increased communication for the need of
materials and hence one gets lower costs, better inventory turnover, reduce stock outs and other
significant benefits. Data processing systems are designed on the basis of the integrated
material function.

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pay. Journal of Accounting Research (Autumn): 427-447.

Adams, M. T. and C. S. Troutman. 2012. Avoiding missteps in the LIFO conformity rule.
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Aggarwal, S. C. 1985. MRP, JIT, OPT, FMS? Harvard Business Review (September-October):
8-10.

Agin, N. 1966. A min-max inventory model. Management Science (March): 517-529.

Agin, N. 1966. Optimum seeking with branch and bound. Management Science (December):
B176-B185.

Agrawal, S. P. 1986. Inflation, maintenance of capital and IRR models of capital budgeting.
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Ahadiat, N. 1986. Solving inventory problems by simulation. Journal of Systems Management

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Websites:

www.btibd.com

www.google.com

www.ignou.ac.in/edusat

The National Building Code of Bangladesh 2005(NBC).

www.scribd.com/shree0605

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