UNIRI
PROJECT RESOURCES AND SITE PLANNING
3.1 INTRODUCTION
Site layout planning is the most important task in site
management.
Extensive time loss and cost ovemuns could result in large
projects, where the number of manpower, subcontractors,
and equipment involved are high, if there is no effective and
systematic eapproach to site planning.
A detailed planning of the site layout and location of
temporary facilities can enable the management to make
considerable improvement by minimizing travel time, waiting
time, and increasing worker morale by showing better and
safer work environment
Construction site layout involves identifying, sizing, and
placing temporary facilities (TFs) within the boundaries of
construction site.
These temporary facilities range from simple laydown areas
3.2.1 Importance
to warehouses, fabrication shops, maintenance shops, batch
plant, and residence facilities.
Required temporary facilities and their areas are depending
in many factors including project type, scale, design, location,
and organization of construction work
Site planning in particular, has been the most neglected
aspect in the construction industry and the attitude of the
engineers has been that it will be done as the project
progress.
It is important to realize that the site planning will be the
conditions that site personnel will live with for the total
duration of the construction period. Thus the careful pre-
planning is essential.
Also, since the labor cost on a large project constitute
approximately 50 to 60 percent of the total project cost,
significant saving can be occurred if the moved
labor force
freely and quickly within the site.
3.2.2 Objectives
Layout planning, in general, can be viewed as a complex
optimization problem that has many engineering
applications ranging from the layout of manufacturing plants
to the layout of computer chips on a board.
2MATERIALS MANAGEMENT My 15
Material Management is the process which involves all the
activities concerning materials right from the time the need
for the materials is established until they are issued to the
construction site.
Material constitutes 40% to 60% of the total project cost and
hence the success of the project depends upon the materials
management.
(3.1)
It is very necessary to have proper planning for the materials
management before and during the project work
If required materials, in quality and quantity, are made
available at the proper time, there will be substantial saving
in cost, time and also there will be improvement in quality of
construction or the project.
It decides scientifically what to purchase, when to purchase,
how much to purchase, from where to purchase, where and
how to store and general flow of materials for any project
and therefore, forms an important part of big projects.
The materials management covers al the aspects of materials
costs, materials supply and materials utilisation. It is the
technique to improve the productivity of the capital by
reducing the materials cost, preventing blocking up of large
amount of capital in materials for long periods.
[May 161
Purchase of goods materials; for quality to be purchased
from reliable place.
Timely purchase of materials to fit in the construction
schedule in the required right quantity.
Purchase of materials at reasonable rate. Bulk purchase of
materials may increase profit margin and may contribute to
ssaving in time.
Proper arrangements for storing of materials and proper
inventory control.
Avoiding wastage of materials.
Managing perfect and close co-ordination between the
various wings of construction from view point of material
supply.
To watch the market conditions and price fluctuations with
regards to the materials required for the project and to take
proper decisions regarding purchase.
The objectives of materials management can be categorized in
two ways as follows:
1. Primary objectives
2. Secondary objectives
1. Primary Objectives
Efficient materials planning,
Buying or purchasing.
Procuring and receiving,
Storing and inventory control,
Supply and distribution of materials,
Quality assurance
Good supplier and customer relationship
Improved departmental efficiency.
 PROJ RESOURC
PROJECT MANAGEMENT &ENGINEERING ECONOMICS (TE CIVIL)E.2). AND SITE PLAN
control of materials purchase sed,
2. Secondary Objectives Quality
Material handling,
Efficient production scheduling, analysis and value
Use of value
To take, make buy decisions, of worke in
gineering,
or
Developing skills materials
Prepare specifications and standardization of
matena Smooth flow of materials in and out of
the managen
To assist in
product design and development,
Forecasting demand and quantity of materials
organia
Economy in cost of
Consistency. of quality material

Lower inventory
Steady fow of material nvestment

Improved corporate
Objectlives of materlal image through good
Speedy disposal of management buyerseller
Surplusmaterial relationships

improving competitive Goods record

Strength

Elimination Preservation
minimisationof Conservation of
wastageofmaterias material
Fig. 3.1
3.2.3 Functions of Material Manager [May17] To see that capital locking is avoided and
unnecessarily la
The functions of the Materials Manager be enlisted quantity of material is not purchased and stored
can as
below
Planning of required materials and its programming i.e.
To have proper accounting of the materials.
phasing the supply of different materials required for the
project To have proper inventory control of the material stores
Procuring of materials required for the construction To have proper value
project. analysis of the stores.
Arranging for storing the materials needed and purchased.
To see that excess use of
materials is avoided and
To plan the economic use of the materials.
workmanship is prevented.
To keep cdose watch on the supply and use of materials at
To the proper disposal of
see to
every stage of the project. surplus material and as
the scrap and rejected material if
To see that unnecessary large supply of materials is not made
any.
and un-requíred materials is not stored. 3.2.4 Qualities of a Material Manager [May
To keep careful watch and to that proper material is
see Material manager should
possess the following qualites o
utilised at right place and bad workmanship is eliminated. Know the market trends.
To see that site space for storing material is properly utilised. Know newly introduced materials.
To see that stores are so arranged that the materials are
Understand the system in the
easily accessible and can be easily removed for use for actual organisation thorougny
construction. Possess ability in inication
analysis, organisation and Con
To see that there is proper transportation arrangements for Possess ability to use
equipment and oftwares

compu
receiving the material at the site and proper passage for Familiar with the supply chain managen systems.
movements of trucks, carts, machinery and the equipment for
Should have Suppo
stocking, utilisation and removal of the materials to and from training in project manage
production schedule, for purch
the storing site. materials etc.
to plan requirement
PROJECT MANAGEMENT&ENGINEERING ECONOMICS (TE CIML) (3.3) PROJECTRESOURCES AND SITE PLANNING

SIN MATERIAL MAN GEMENT Desig Omice&

ccoun
functions involved in material management
As stated above the
are
Disputs&
1 Purchasing legal Purchasing Marke
2 Matenial handling depertment
uppller
3. Inventory.
onstrue ateria
34PURCHASING Nov 10 ction eceiving
store
function has to be efficient and there should project
The purchasing
be effective control over the expenditure fund and inventory Fig. 3.2
fiow of material
3.4.1 Method of Purchasing
Though purchasing has to be done at a reasonable price, Various methods of purchasing are adopted depending upon the
qualityof the material has to be maintained and it is not conditions, time and urgency. The two popular methods adopted
necessary that the purchase be made always from the lowest for market purchasing are
bidder as it may not maintain the needed quality.
1. Inviting tenders
the specifications laid down
For maintaining the quality, 2. Rate contract purchase.
shouild be in details without any ambiguity. It is necessary
In the first method, a list of reliable suppliers is prepared for
that the right quality material should be purchased at right
different materials and tenders are invited from them.
time at reliable right rate.
The information about the quality of the material required in the
.The suppliers from whom the purchase is made should be
form of specifications and the quantity and the period of supply is
reliabie given in the tender. The tenders are published in leading
Sometimes purchasing of different material is effected
newspapers.
through agencies. Such agencies should be reliable. There The suppliers desirous of accepting the offer for supply of the
shousid be a lst of materials necessary for the project with the material are required to quote their rates for the supply.
specñications and the quantity. After receiving the tenders a comparative statement is prepared
s also necessary that a list of reliable suppliers and and order is placed with the firm normally quoting the lowest bid.

agencies supplying the various materials be maintained and However, in some cases lowest bid may be rejected if there are
this ist should be modified from time to time to reasons to do so depending upon factors like past experience etc.
accommodate new reliable suppliers and agencies.
3.4.2Procurement of Materials
i s also responsibility of the purchase department that Materials for construction are procured by direct purchasing
payments are made within reasonable period after the or obtained from the stores.
purchase is efected and found satisfactory For small works and small organisations the materials are

Purchasing is a service function that supports the activities of purchased directly as and when required keeping particular
othe operations. There must be steady and reliable flow of purchase schedule.
information between concerned departments. However, for big organisations the purchasing etc. is done by
The ditferent concerned departments may be: the materias management department and is procured for
the construction from the stores.
Design Every organisation, small or big, must have separate purchase
Accounts
department.
Different suppliers in market The purchase department has the following respponsibilities
Stores for receiving the material and functions
Actual construction or production T o get the right quantity of materials of the required
egal department for disputes specifications, at the minimum overall cost inchuding
he structure of purchase department and relationship with other transportation etc.
departments is ilustrated in Fig. 3.2. To adopt the proper procedure for the purchase.
 S AND SIT
KCES AND
FROJECT MANAGEMENT& ENGINEERING ECONOMICSs (TE CVL
2
Centrallsed Purchasing : Method adopt
bodies and also when the construction
SISIEbyTEPLANI
PLON
Govem
an purchases made by Government and Semi-Govt. bodies, public
undertakings, proper procedures
regulations have to be followed.
has to be adopted and rules
and several projects undertaken:simultaneously.
Purchasing: This is for e
organisation
Rate Contract
There are following methods of purchases.
3.
are regularly in large quantities.
required
ecificNomally
tems
L Market Purchasing: Method adopted for locally availiabie contract is for a period of one year.
materials by private concerns.

A Sample Purchase Order is as Shown Below:

XYZ CO. LTD.
cONSTRUCTmON DEPARTMENT

TEL: 12345678 FAX: 87654321

PURCHASE ORDER

Supplier's Name P.O. No.

Address Date
Site

Dear Sir,
We are pleased to place this order for the following material, subject to the terms and conditions
printed overieaf.
Description with sizes
No

Supplier's Quotation No. Date:

Sales Tax Extra/ Inclusive Guarantee / Warranty
Octroi :Extra / Inclusive Payment Terms
Freight Extra / Inclusive Requisition No.
Delivery Schedule

3.5 MATERIAL HANDLING AND Director

It is the movemet of material from
CONTROL Material
goods storage through manufacturing orreceiving
in process
to finished material handling,
to finishedtherefore,
is the
movemen
n

In Civilengineering9 project, it is the movement of storing.

materials handling also includes goods the
ready for dispatch. lateri
to its use as it is as a raw material or
after use from the supply of material at the
actual construction. processing if any in stores the and
invoves

Timber may be purchased as a raw material and transportation.

The
or market
processed at sight for
then may be and transportation
at times cost of the mat
naterials in India is qute
hig
preparation
of doors and
window good time
Material handling system
is also required portation
frames, shutters or trusses wnich are used in construction. red for transp
with goo
control over the has to be efficie
Material issue same.
slip is used for issuing materna
 PLANNING
PROJECT RESOURCES AND SITE
-

&ENGINEERTNG ECONOMICS (TE

CIVIL) (3.5)
PROJECT MANAGEMENT
issue slip is as follows:
A sample material XYZ CO. LTD.
cONSTRUCTION SITE
MATERIAL ISSUE SLIP
No.

Site

Date

To Store
Issue to Contractor

Through His Representative

Building No./Locatic
Item with

Storekeeper
Issued by

Recd. by
Gener r (For Aggregate

GPR NO B Oty

services (eg. materials used

The materials used for auxiliary
3.5.1 Economical Uses of Materials for scaffolding, centering etc)
should be properly and
and is one of such
Economic use of the materials is of prime importance used and wastage and wasteful use
The economically
of the most important responsibilities of Materials Manager. indirect materials (Bamboo, corrugated iron sheets, roaps
and
economic use of materials lead to economy in general etc.) is avoided on large constructions.
achieve this,
reduction in time of completion of the project. To
the materials manager has to look carefully to the following The small tools and plants such as ghamelas, pawadas,
not misused so
pickaxes etc. are properly used and they are
points
that their life is not reduced.
is in
Costy material like cement, steel, timber etc.. stored 3.5.2 Indent, Storing of Material and Issue
dosed space with lock and key arrangement and they are
material is . Indent
stacked and stored and only the required
properly
For Government works some materials such as cemet steel,
issued.
the
of other materials like sand, coarse aggregate is G.I. Sheets, asbestos sheets or some tools are supplied by
Scattering Government to the contractor, as per the conditions of
avoided and stocked properly so that loss is
they are contract.
avoided.
The materials to be supplied are specified in the contract. For
ecess materialis supplied from the stores, this excess
receiving such materials from the Government stores the
material is recovered and redeposited in the stores. contractor has to put up a requisition in writing in prescribed

A the surplus materials and the scrap should constantly be form which is called indent
Collected from the worksite and the stores should always be The indent is in prescribed Form No. 7 and is in a booklet
pt clean. The surplus material and the scrap should be form, each page in triplicate. This indent book is machine
sposed offand the value should be recovered. numbered and consists of indent,counterfoil and invoice.
PROJECT MANAGEMENT& ENGINEERING ECONOMICS iMGPROJECTRESOURCES AND SITE PLAN
(TE CIVIL)8.)1
With each subdivision of Government Engineering The invoice is the oucher for the issue of the
the materialk
Department, there is an indent book and for the
materials the indent is required the central stores.

or the
prepared by the Sub-divisional Officer If the material is issued to the contractor, the siana.
Deputy Engineer or the Assistant Engineer incharge of nature o
the subdivision ànd sent to is taken on the invoice and the
The indenting officer will fill
the officer incharge of the stores contractor

materials issued to the contractor is recovered

cost of
the details on the indent and the
counterfoil and the officer
incharge of the stock will issue the running bills at the issue rate.
from
materials as per the
availability in the stock and will correct For such materials unstamped receipt in triplicate ie
the indent
according to the actual material issued and from the contractor, where in all the details of the obta
accordingly will make the entries in the invoice and will send mate
the indent book back to the issued are incorporated. A form of indent is given hel.
indenting officer.
After receiving the materials the
below
System of indents may be followed by very big consth
indenting officer will return
the invoicee to the stores officer after companies which may have central stores and where .
signing the invoice as
acknowledgment of having received the material as per the works are in progress in nearby areas.
invoice.

FORM OF INDENT No.

Site:

REQUISITION SLIP Date

Description of New Qty Dellvery Total Store Remark For PurchaseDopt Remark
No. Material Reqd Regd. Received Regd Material Orderad to Crdered no.
upto Date up to DatePage No forBldg ate

P.E. Scrolling D &D/Project Coordinator

She Neme w Group ngs tGRN No.
Suppiier Name : Date
PurchaseOrder No.: Goods Receipt Note Truck No.
Challan No. and Date: Time

Sr. No. celved OtyAccepted Qy Rejected Cty Remarks

Storage Incharge g QA Incharge

Project Manger
PROJECT MANAGEMENT &ENGINEERING ECoNOMICS (TE CvIL) (3.7)
2. Storing
On any civil engineering works different types of materials
are required simultaneously and hence the storing of
materials has to be done systematically so that the materials
can be received, stored and issued for use without any
difficulty.
For such storing a proper layout of the stores is vey
essential. Proper arrangements ane also necessary for security
of the materials from theft, and from manhandling.
Materials like petrol, diesel etc, have to be stored vey
carefully and absolute care has to be taken for them.
In general, materials are stored as per the nature of the
materials and their cost. The stores may consist of sheds and
open area with compound wall or barbed wire fencing.
Construction Materials are Generally Stored as Below:
Materials like cement, timber, doors and windows, grills,
paints, fuels, small tools are stored in sheds. Proper
arrangement is made for stocking cement bags, timber etc.
Fuels and any materials which can catch fire easily should be
stored Such stores must
separately. have locking
arrangement.
Materials like sand, rubble, coarse, aggregate, bricks can be
stored in open area without any enclosure.
Materials like steel, bituman drums, pipes, CI and A.C.
and
their filings may be stored in open space with enclosures.
Materials like small parts, pipe fitting, door fittings etc. to
be
stored in sheds and are properly stored in containers,
property labelled.
Perishable materials requiring careful handiing may be stored
in open sheds.
Security Measures for the Stores may Include the Following:
Providing chaukidar and/or other security staff.
Adopting gate pass system.
Providing locking arrangementfor sheds.
Providing double lock systems for the materials issued
by Government to the contractor on Government works.
Proper maitenance of the stores, and also stores account is very
important.Annual stock verification, inventory etc., are the routine
part of stores management but surprise checks are also carried
Out.
Proper account of receipt, and issue of the materials is
maintained and total value of the stock in stores should be
known. The stock verification
is carried to verify if there are any
excesses or
shortages and then the responsibility of such has to
DE TIXed Also some times losses are written off and surplus
PROJECTRESOURCES AND SITE PLANNING
materials are disposed off after taking due permission with proper
procedures. Proper registers are maintained for the stores
3. lssue of Materials
Any Issue of materials from the stores should be against the
authorised indent only. If the central stores is very big one, the
issue can be systematised by fixing the days/dates of issue of
different materials or days/dates for different subdivisions or
sections. However, on every day the stock books must be
updated and balance of every item and value of stocks must be
worked out every day.
3.5.3 Duties of Store Keeper [May 16]
To receive material on site. Check its specification and
quality.
Make necessary entries in the general purchase register.
Keep separate registers for important items such as cement,
steel, etc
Keep the material manager informed about the stock of
materials especially fast consuming materials.
Keep the material in clean, dry and well ventilated place
Special arrangement is required for different materials.
Hence, all the materials received wil be stored according to
that. The pattern of LIFO or FIFO should be maintained as per
the type of material.
3.5.4 Organisation of Purchase Department [Nov. 15]
Primarily it is connected with material planning.
It should be headed by a man of high integrity with wide
market knowledge.
The purchase statistics and usual purchase organisation chart
is given below
Purchase statistics consists of the following steps:
Analysis
Interpretation
Vendor programmes
Safety levels
Purchase efficiency
In large industrial organisations
the amount of purchasing
involved is so big that each and every work is assigned to
different persons ie. arrangement for transportation of the
different incoming materials and outgoing materials has to
be assigned to separate person or
separate department
As such the purchase
department must have many
subdivisions specialising in different lines depending upon
the requirements.
In case the money involved in
purchasing is very high there
may be a purchase research department inolving continuing
research regarding availability of various materials, their costs
trend and their substitutes if any. This
department may keep
a thorough record of market fluctuations and try to make use
of it by purchasing inventories at the lowest cost
 PLANNIN
PROJECT RESOURCES AND SITE
PROJECT MANAGEMENT &ENGINEERING ECONOMICS (TE
CIVIL) (3.8) in procuring qua
the purchase department
be useful to
An additional subdivision may keep all
record such as invoice timely at low cost. nlyosg
materials in required quantity
checking, order-writing, record keeping
etc.
the purchase organisation working und
in A sample of
Such systematic up-to-date record keeping will be useful Materials Manager may
be as under.
bringing out any information needed at any time which will Manager
Materials Manager or Purchase
Office Inspection
Material
Traffic Section Purchase Purchase Management
Research Disposal
Section
raw mater
business resources like cash,
ERP systems track
or Assistant business commitmen
Each section may be headed by Deputy Manager production capacity
and the status of
and payroll.
Manager. orders, purchase orders,
data ac
are:
make up the system share
general in purchases the types of organisations
In The applications that
Centralised Purchase Department. (manufacturing, purchasing, sa
the various departments
the data.
Decentralised Purchase Department. accounting, etc.) that provide
Centralisation is very common in single plant
industry while Manage all operations
decentralisation is useful where
the plants are in different in a single integrated system
firms
thee modern trend is that the
geographical areas. However,
decentralisation.
want to switch over and
methods have their own strength
Each of the above
weakness.
are
Reasons for Centralisation
The firms gain advantage of standardization.G eT btd
Paper work is reduced.
Better control and greater flexibility and
thus high economy
ERP
can be achieved.
The organisation can purchase large
volume of materials for Fig. 3.3
the entire plant resuiting in economy. bietz ERP Modules
, 247 software modules.
Reasons for D e c e n t r a i s a t i o n
are
ERP software is made up of many
efficiency of purchasing
is improvedif the mimics a major functional are
Senices and Each ERP software module
into separate sections. ERP modules include modules
enterprise is organised an organization. Common
control ino purchasing of dissimilar product planning, parts and
material purchasing, inven
There wil be better
different projects order tracking, fina
materials at different plants or at
required control, product distribution,
of dissimilar nature. accounting, marketing, and HR
in procurement the ERP mod
t may provide greater flexibility Organizations often selectively implement
feasible
There will be better direct vendor control that are both economically and technically
become easier and in some
Operations of purchase may Project
cases even economical.
Human
36ENTER OURCE PLANNING(ERP) Production
planning resource
INov. 15]
all resources and their use in
ERP is a process of managing
in a coordinated manner.
the entire enterprise
Purchase Functional Financa
An ERP is a fuly
integrated business management system modules
processes
the core business and management
that integrates structured environment in which
an organization
to provide and reliable real-time
decisions are
supported by accurate nventory Marke
information.
Contro
of core business processes,
an integrated view
ERP provides databases maintained by a
real-time, using common
often in Fig. 3.4
database managementsystem.
 (3.9)
DROJECTMANAGEMENT&ENGINEERING ECONOMICS (TE CVIL) PROJECTRESOURCES AND SITEPLANNING
3.6.1 Characteristics of
ERP
Resource Planning) systems typically include the
ERP (Enterprise
following characteristics
that operates in real time (or next to
An integrated system
on periodic updates.
real time), without relying
which supports all applications.
A common database,
and feel throughout each module.
A consistent look
Installation of the system without elaborate application/data
integration by the Information Technology () department.
of ERP
3.6.2Advantages Fig. 3.5
Better utilization of organizational resources
TheInventory Term can be Classified into Two Broad Classes:
Better organizational control, especially in large companies,
where the volume of information is more than in a small 1. Direct Inventory : These are the items which are directly
used in the manufacturing of product or civil engineering
company.
construction and become an integral part of the finished
Duplication of information is avoided.
product. Direct inventories are further classified into three
Improved communication, both internaly and externally.
groups.
Company profitability analysis can be carried out to analyses
Raw Material Inventory These are such items which
where costs are higher and where there are more sales
require further processing before they are ready to be
Improved decision-making process within the company.
used in the assembly in finished product.
The company is able to react better to any unforeseen
Work-in-Process Inventory: These are the materials
problem or situation.
which are handed over to the production department as
Beter use of time.
they are required during the assembly in finishing the
Enhanced customer satistaction product and without which the final assembly or product
Fiexcibility in business operations is not possible.
3.63 Disadvantages of ERP Finished Goods Inventory The finished units,
A n ERP 5system provides current status
only. subassemblies, assemblies which are in stock and ready
for shipment to consumers, such inventories are called
Overcoming resistance to sharing sensitive information
Detween departments can divert management attention. finished inventories.
2. Indirect Inventory: It is the supply of those items such as
Tney do not use external intelligence
oils, paints, lubricants, office material etc. which are necessary
Ecan cost more than less integrated or less
for manufacturing but do not become an integral part of
cOmprehensive solutions.
Tee are few experts in this finished product.
system.
h e systerm is not
applied correctly, it can be very
3.8 INVENTORY MANAGEMENT
detrimental to the company Inventory management is the management of inventory and
3.7 1NVENTORY IMay 17
stock
As an element of supply chain
management, inventory
entory refers to goods and materials that a business
management includes aspects such as controlling and
olds for sale to
customers in the near future.
overseeing orderinginventory, storage of inventory, and
ventory includes raw materials, work-in-process inventories, controlling the amount of product for sale.
mponents, finished products etc. held in storage awaiting Consumable articles are continuously required in all
use.
industries including Civil Engineering projects and inventory
The term
inventory excludes the machinery, furniture and management is carried out to determine the frequency of
other fixtures if
they are in
use ordering the consumables and the fast wearing parts.
 PROJECT RESOURCES ANDSITE PLANNNING
ENGINEERINGECONOMICS (TE CIML)
(3.10)
MANAGEMENT&
OJECT
and other
Proper arrangement for storing the material
consumables
that the damage to the material.
t necessary to ensure
is
available as T o seethat there is no
durin
are always
articles required for the production
the storage.
and when required.
is to ensure this and
To ensure security of stock.
The purpose of preparation of inventory i
of proper record of stock-receipt and
of the procurement is Maintenance
at the sametime to see that the cost information regularly
of inventory and posting
kept minimum.
minimum stock of consumables sincerely.
This is achieved by making
and other articles to such an extent which
would be required Fixing responsibility of performance.
and at
for continuous production or execution of the project

the same time the project or the production will

not be held 3.9ECONOMICAL ORDER QUANTID
be made in any
One of the basic decisions
that must sto
materials.
up because of non-availability of the the quantity to ong
control control system is that of determining
Thus, stock holding is an integral part of inventory largely depends upont
and stock control deserves special attention in production since investment in inventories
quantities which the items are
in ordered for replenishmen
planning and control.
Ordering large lots infrequently reduces administrative w
3.8.1 Objectives of Inventory Control but increases investment in the stocks. Ordering small
The management of inventory control is very complex as it is
the investment low but increa=
affected by different factors such as finance involved and capital frequently keeps
lodked, credit terms, market fuctuations transportation etc. and administrative work.
hence the management of inventory control should be with the Economic Order Quantity is the level of inventoryt
minimizes total inventory holding costs and ordering cost
following objectives
There should not be excessive inventories which may lead to is one of the oldest classical production scheduling mode
wastage or unnecessary holding of stock EOQ represents the optimal quantity of inventory a compa
There should neither be shortage of inventory which may should order each time in order to minimize the co
lead to stopping of production and delay in project duration. associated with ordering and holding inventory.
There shouid be acceptable consumer service. EOQ applies only when demand for a product is const
Iventory Control Functions can be Summarised as Belovw over the year and each new order is delivered in full w
t allows for the erors in forecasting the demand.
inventory reaches zero.
. t minimises the difference between the scheduled progress
There is a fixed cost for each order placed, regardless dft
and actual progress.
t permits more economical use of ancillary services such as
number of units ordered. There is also a cost for eachu
held in storage, sometimes expressed as a percentageofi
building and also use of machinery, equipment and
purchase cost of the item.
manpower during fluctuations in demand.
t permits the organisation to purchase the material and to The required parameters to the solution are the total dem
for the year, the purchase cost for each item, the fixed
manufacture the products in economic lot size. cos
3.8.2 Steps in InventoryControl place the order and the storage cost for each item per ye
Inventory Control problem is complex Note that the number of times an order is
There should neither be a situation of no stock nor excessive
placed will
affect the total cost, though this number can be determ
stock from the other parameters.
Most of the time the Material Manager is busy with the
inventory problems such as 'how often should he order, the 3.9.1 Assumptions Underlying the EOQ Model
how should he coup up with the production when sales are The ordering cost is constant.
uncertain', how can he plan production and procurement for The rate of demand is
season sales etc. known, and spread evenly throu
the year.
Hence following steps should be followed for inventory The time that
control. elapsed between the placinga replen
Planning the operation for purchase of different material order and receiving the item into stock, called tin
zero. e
and effective method of acquisition.
Physical verification of the material in stock from time to The purchase price of the nt
item is constan
time -12
independent of the order size.
OJECT MANAGEMENT&ENGINEERINGECONOMICS(TR C_(3.11 PROJECT RESOURCES AND SITE PLANNING
. The replenishment ls made instantaneausly the whole betch 3. Stock Out Cost
is delivered at once.
The stock out cost is also a major cost which must be
, The inventory camying charges vary directy and lineartly with ellminated and if not possible at-least be minimised
the size of the inventory and are expressed as a percentage by
logieal planning
of average inventory investment.
It is easy to understand that the procurement cost
The item can be procured in the quantities desired, there
(which is called as Direct cost) Includes the cost of the
being no restriction of any kino material and acquisition cost which consists of all the
The items has fairly long shelf life, there being no fear of
expenditure connected with actual procurement such as
deterioration or spoilage.
salaries and wages of personnel in purchase
department,
3.2Dwentory Costs(Indirect Cost) official expenditure on calling quotations,
inspection,
nentory costs can be divided into following three sections stationary and postage charges and any other
1 Processing or ordering cost expenditure connected with actual procurement.
2 ventory camying cost The acquisition cost is more or less same irrespective of
a Stock out cost. the quantity to be purchased. Hence if the
quantity to be
Processing or Ordering Cost purchased is a big lot the acquisition cost will work out
orti
to be less per unit of the material
The processing or ordering cost consists of
expenditure purchased.
made on iventories till they are stocked in the stores. It, The variation of the
processing cost with
reference to
therefore, consists of. quantity ordered is shown in Fig. 3.6. It is quite clear that
the processing cost will be
Cost of processing the requisition and any follow up. It is inversely proportional to the
the cost involved in official quantity ordered and purchased.
procedure of ordering for the
materials and any follow up. As far the inventory carrying cost is concerned it will be
Cost of receiving the material. This includes
the
directly proportional to the quantity of the material and
expenditure for inspection and labour for receiving. hence the variation of the
inventory carrying cost with
Cost involved in processing vendors invoice. reference to the quantity is as shown in
y axis
Fig. 3.7
Cost of material delivery to stores and
eb iin
proper oed
arangement of storing.
Imventory Carrying Cost
verntory camrying cost consists of the following:
Loss of interest on capital involved in inventory and no
return on such investments.
Cost of storing in the fom of ais
space requirement. ers nventoy Order quantity in units
Handling during storage and issue. UCUp Fig. 3.7
Cost of insurance, deterioration,
damages, depreciation, The total inventory cost is therefore the sum of the
obsolescence and taxes if any processing cost and the
y as inventory carrying cost and
hence the variation of the total cost
with reference to the
quantity is as shown in Fig. 3.8.
In Fig. 3.8, it can be seen that the optimal order quantity
occurs at the point where the ordering-cost curve and
the carrying-cost curve intersect.
The optimal order quantity occurs at a point where the
xaxis total order cost is
Quentity In unlts equal to the total holding cost.
This fact
Fig..3.6 importantly reduces development of the
economic order quantity model.
 PROJECTRESOURCES AND SITE
PLANN
NG
&ENGINEERING ECONOMICS (TE
CML) (8.12) PR
PROJECT MANAGEMENT Optimization of
the Model
2. (qo) that minimizes Exe
economic order quantity
respect to decis
To determine
ATC with
Ordering costs
Holding costs total cost, we must differentiate per
derivative to zero.
and set the first
Co
variable q
Total cost
a . -- o
da
SO

(when order quantity equak

Cu
EOQ then q = qo)

go EOQ =

or
Order size
Economic Therefore,
ordering EconomicOrder Quantity =
quantity Procurement cost
Fig. 3.8 Annual consumption (units) x No. of orders
where the
2x
The optimal order quantity occurs at point the
Price per unit x Inventory carrying cost
curve
and the carying-cost
ordering-cost curve
SOLVEDEXAMPLES
intersect units of a commodity
stockist has to supply 200
where the Example 3.1 :A from the
The optimal orderquantity occurs at a point customer everyweek. The cost rate is 7100/- per
unit

total holding cost.

his
is 7200/ per. order. The2
total order cost is equal to the manufacturer and the ordering
cost
the cost of inventor
of the invention is 20% per year of
This fact importantly reduces development carrying cost of expense overt
model. Our task can be economical order quantity and yearly
economic order quantity Find the

reduced to balancing these two costs. commodity. tris f

: Solution: i ts saise
Variables Used
Co Ordering Cost perlot 200/
Annual consumption of the item (units) Total annual requirement of item
S =

Cu
Price per unit = 200x 52 10400 units
Procurement cost per order Cp Annual Carrying Cost

Imventorycarrying cost as percentage 20%

a

(decimal) 0.2
ofaverage inventory investrment Cu Unit Cost of item
Order quarntity (units)
qo = 7 100/- unit
Economic order quantity

3.9.3 Expression of EOQ Model

[May 15 2 CoS
CuI
1 Preparation of the Model
Annual procurement cost 2x 200x (200x 52)
x Procurement 100 x 0.2
No. of orders per year
Annual consumption 456.07 units
cost per order 200x 52
Order quantity No. oforders
xProcurement cost per order 456
22.8 say 23
. (3.1)
Frequency of order = 15.8 days
Annual inventory carying cost=
Hence, order will have to be placed after 16th day.
Average inventory investment)
x [Inventory carrying cost)
Total cost ofinventory =Processing Cost+Carrying Cost
torder quantity x Price per unit)
200 0 X
56 x100x
100 02
23 x
x Inventory carrying cost = 4600 + 4560

= 7 9160
(3.2) Total Expenses yearly = (200x 52) x 100+9610
10,40.000 +9,610
Annual Total Cost (ATC) Gxi (3.3) = 10,49,610 year.
 MENT&ENGINEERING ECONOMICS TE CIVIL) (3.13) 220 MOHPROJECT RESOURCES ANDSITEPLANNING
PROJECTMANAGE
raw mäterial from
construction company requires
1500 door framnes Example: 3.5: The rate ofuse of aparticular
3.2:A stores is 1000 unit/year. The cost of placing a receiving order is
frame is 1800 per frame. Ordering
Erample

door
Cost of each The cost of each unit is100/ The cost of carrying
ner year. order and holding cost is 18%.
Calculate EoQ 50/
Cact is 2000 per inventory in percent per year is 0.20, depends
on average store.

EOQ =V May 15, 8M

Solution:
Cu

Cu Unit cost R1800/- per frame Determine

= Annual requirement = 1500 EOQ
18% (i) Calculate order point when lend time is 6 months.
I =
Inventory carmying cost
Co Order cost = 2000 per ordder Solution:.
2000x 1500 20
/ 2x1800 Inventory carrying cost = I =

10o 0.20
EOQ x 0.18

136 units Annual requirement= S= 1000

Unit cost= Cu 100
. No. of orders 15011
136 Co 5 0

Bronmple 3.3:A construction company purchases 10,000 bags of i) Find E0Q

cement annuoly. Each bag of cement cost 300/- and cost

O EOQ 2xCs 1x50x1000
incared in procuring eoch lot is 150/- The cost of carrying is CuxI 100 x 0.20

25%What s the most Economic Order Quantity? What is the 70.71 71 Nos.
average inverntory level?
(ii) Now calculate order point when lend time is 6 months
Solution: Cu Unit cost 300
Number Annual
of ordere oEOO
demand 1000
S = Annual requirement 10,000 71
I =
inventory carrying cost 25% 14.084 14 orders.
Co 1 5 0 Example 3.6: Yearly requirement of cement by a large firm is
E0Q 1 / 2 x G s 300 bags. The cost of a bag of cement is F300/- lead time is one
C month and ordering cost per order is 200/- Assume annual
2x150x10000 carrying cost for inventory is 20% of average inventory
300 x 0.25 management Find EOQ and total inventory cost. [Nov. 15, 6M]
40 Solution: Ordering cost =Co 200, S = 300

.No. of orders 10000

40 250 20
Inventory carrying cost =100 0.20 I
100

Awerage inventory 40+20 Unit cost= Cu 300 per bag

xample 34A supplier has to supply 400 units of a commodity to EOQ EOQ 2xCX
Cx
S CUstomer every week. The cost rate is 200 unit and CuxI
oroerng cost is 200 per order. The carrying cost ofper
per year of the cost of inventory. Find Economical inventory is
Order
2 x200 x 300 =
44.72 Say 45
Quantity. 300 x 0.20
We get,
Solution: EOQ= C
C= Unit cost
Inventory carryingcost=
7 200/- per unit
=

S = Annual
I
requirement = 400 x 52 weeks
= Inventory carrying cost= 0.2 -As 200 300 x020
Co= 200 per order 2683.33 =7 2683
EOQ x200 x20800
200 x0.2
Example 3.7 :A construction company purchases 10000
of cement
annually. Each bag of cement cost Rs. 350/- and cost incurred
456 per order in
No. of orders procuring each lot is Rs. 160/. The cost of
4 20800
5 6 = 45.6 = 46 orders EOQ carrying
is 24%. Find
A56 INov. 16, 4M]
 PLANNING
(TE CIVIL) (3.15) PROJECT RESOURCES AND SITE
oJECT MANAGEMENT &ENGINEERING EcONOMICS
stock o r safety stock is
introduced.
To modify this model a buffer
.12 INVENTORY MO This model is represented
in Fig. 3.10. This may
eliminate the
3.12.1Introduction occurrence of such
conditions will get
condition of stock out or
representation of variation of stock level of itemns
i s the
upon the size
of buffer stock. This model
time. It represents the behaviour of an item during reduced depending
against and works successfuly.
the period of its issue from the stock and replenishment. works in somewhat realistic way
Design of the inventory
made is based upon the data
This model is extensively used in practice for regularly issued item
item earlier.
received from the use of the of class A or class B.
model works out successfully in practice and
A well designed
in keeping the inventory cost minimum and Maxdmum stock
is also effective
also avoiding the stock out or atleast reducing it B+Q
to
minimum.
Reorder point
Three types of models are generally used as follows,
Buffer stock level
1 The Wilson's Model.
2 Replenishment Model.
3 The Two Bin Model.
uniform rate of and L
n all the above models a consumption A,B,C are the reorder point
instantaneous replenishment is assumed and in general,
therefore, inventory consumption forms a saw-tooth figure. Fig. 3.10
3.122Wilson's Model The buffer stock level is B and if L is the lead time and sd is the
. t i s also called Fixed Reorder Point Model. It is represented point level of inventory would be
average demand the Reorder
by Fig. 3.9.
B+ Lsd.
In this, there is an inventory cycle which repeats itself, the
dirnensions of the cycle remaining constant. When the inventory is replenished the level will be B + Q.
.The demand is assumed to be constant and lead time for where Q is the Economic Order Quantity.
each cydle is same.
3.12.3 Replenishment Model
The replenishment order is placed for Economical Order
Quantity. In this model, review is taken at intervals and the reorder
A n order is placed in such a manner that the material from quantity changes at each review.
the supplier reaches exactly when the stock of the inventory
However, the maximum inventory level is fixed on the basis
reduces to zero level.
of the previous data of demand and the order is
In the figure A, B, C are the reorder points and L is the lead placed for
time. The reorder is placed at a fixed inventory level and the quantity equal to (Maximum Inventory Inventory at
hence this model is called Fixed Reorder Point Model. hand) at each review.
This model is generally used for B class items and also for
lower A class items.
This model is illustrated in Fig. 3.11.
Reorder point level
M Maximum inventory level
FL4 FL4 FL4
Time
Fig. 3.9
of
his model is useful but has following drawbacks -- Buffer stock
due to any reason demand is increased above average
Ra
a5Sumed, particularly in lead time, stock out may occur.
Time
time has been assumed to be constant, If lead time due
m e reason in a cycle extends and becomes more than Fig. 3.11
average, stock out is imminent. In this model, the demand
rate is not uniform and the
actual
demand rate is taken into
consideration.
 Inventory

% Annual consumption value

%value of material used

9
 Cumulative oonempton expenditure

1tttteg: iiiiihil
 PROJECT RESOURCES AND SITE PLAN
NNING
ECONOMICS(TECTML) (3.18) order of
MANAGEMENT&
ENGINEERING
materials in descending of the
PROJECT Solution:Arranging
the

100 costs.
90
30-
cost Cum cas
No 36.4 8.33
70 3,89,900 3,89,800
60
|Cement 50.46 16.67
1,50,000 5.39,800
50 Steel 63.54 25
Reinforcement 1,40,000 6,79,800
40 C 33.33
7,89,800 73.83
30
Cløss Class Class Bricks 1,10,000
41.67
20- 8,74,800 81.77
Aggregate 85,000
10 89.25 50
Mosaic tles 80,000 9.54,800
90 100
10 20 3o 0 5o 60 70 80 94.86 58.33 C
Sand 60,000 10,14,800
Fig. 3.16 97.2 66.67
10,39,800
Example 3.10:Perform ABC Analysis Annual
for the following data: Timber 25,000
Expenditure 10,55,800 98.69 75
PVC fting 16,000
Sr. No Wash basin 10,000 10,66,800 99.63 83.33
,90,000 10. c
Cement 11. Admixtures 3,000 10,68,80099.90 91.67
Tiles 90,000
Electical items 10,69,800 100.00 100
Bricks 95,000 1,000
Sand 2,60,000 |Stoppers for door
Steel 1,20,000 items Vs % cumulative co
5.
2,000 Students should plot the graph of %
. Oil and show A, B and C type of materials.
Timber 30,000
items an
Nails 3,000
Example 3.12: Carry
out ABC analysis for the following
8
9 Dry distemper 15,000 plot ABC curve.
and plot ABC curve. Annual
Categories the above items
descending order of their
the items as per
Solution: Arange ltem No
COsts. tems AB 5,00,000
. Cement
Sand 3,00,000
11.1
2.
4,90,000 44.3
. 4,90,000
A Bricks 1,00,000
67.87 22.2
Sand 260,000 7,50,00
8,70,000 78.7 33.3 B Siporex Blocks 2,50,000
Steel 120.000
44.4 B
Bricks 95,000 9,65,000 87.3
. Paint 60,000
95.47 55.5
TDes 90,000 10,55,000 4,50,000
98.19 66.6 Steel
Timber 30,000 10,85,000
15,000 11,00,000 99.55 71.7 Tiles 70,000
7. Dry distemper
11,03,000 99.82 88.8 C
8. Nais 3,000
8. Oil 2,000
2,000 100
11.05,000 100 C
for the following 9. Course Aggregate 95,000
Example 3.11:Corry out A-B-C analysis
annual consumption of each 10. Electrical fitting 50,000
construction items. The estimated
the results in a
item in terms of its cost is given below. Represent 11. Nails 1,500

graphical form also. 12. Timber 42,000

Amount
Sr No Solution: Arrange all the materials in descending order of tne
3,89,800 annual expenditure.
1. Cement

Sand 80,000 Annual Cu Annuslca. Exo

1,10,000
Xpendtura Exp
Aggregate (oourse) 1. 8.3
Cement 5.00,000 5.00,000 26.00
Steel reinforcement 1,50,000 2. Steel 4,50,00 9,50,000 49.5 1667
Bricks 1,40,000 3. Sand 3,.00,000 12,50,000 66.1 25

Timber 60,000 4. Siporex blocks 2,50,000 15,00,000 78.0 8 33.33

6.
5. Bricks 1,00,000 4167
7. Mosalc Tiles 86,000 16,0,.000 83.0
6. Coarse aggregate 95,000 88.3 50
PVC fitings 25,000 16,95,000
8. 58.33
16,000
Tiles 70,000 17,65,000 92
9. Wash basin 3. 66.6
Paint 60,000 18,25,00 95 C

0.
Sloppers for door 1,000 9. Electrical fiting 50,000 18,75,C00 97.6
Electical iteme 3,000 10. Timber 42,000 83.33
11. 19,17,000 99.8
Admixtures 10,000 11. Ol 2,000 19,19,000 99.9 91.67
12.
2. Nails 1,500 19,20,500 100 C_
100
 PROJECT RESOURCES AND SITE PLANNING
pROJECT MANAGEMENT&
ENGINEERING ECONOMICS(TE cIVIL) (3.19)
order
Rewrite all the materials atongwith their costs in descending
1007
of costs.
90
Hem Cost Cumu Cu
80 1ative Cost
6,00,000 56.35 10
1. Cement 6,00,000| Aftems
2. TOR steel 2,00,000 8,00,000 75,14 20

50 8,76,000 8228 30
3. Mild steel 76,000
12 mm 9,36,000 87.92 B items 40
4. 60,000
| aggregate
9,96,000 93.55 50
5. Sand 60,000

10,53,000 98.91 60
6. 20 mm 57,000
10 20 30 40 50 60 70 80 90 100 399regate
% Items used 10,60,500 99.61 70
7 Fly ash 7,500
Fig.3.17:ABCcurve 8. Water 1,600 10.62,100 99.76 Citems 30

the annual consumption of 1,500 10,63,600 99.91 90

Erample 3.13: Following table shoOws 9 Nails
the items used in a project and their
unit cost. Classify them in
10 O 1,000 10,64.600 100 100
AB, Cclasses and plot ABC curve. Example 3.14: Perform "ABC" analysis or the following data:
Annual Unit cost in IMay 15, 8M
Consumpto Sr No. 5

Water 80 litres 20/litre tens Cement Bricks Nails Dry distemper Tiles
Amount 4,90,000 95,000 3,000 12,000 10,000 30,000
2 Cement 2000 bags 300/bag
Expenditure
ash 50 kg 150kg
Tor steel 4000 kg 50/kg Draw the curve also.
3. id steel 2000 kg 38/kg Solution : Now arrange the items as per descending order of
Nais 100 kg 15/kg their costs.
7. 12 mm Aggregate 3000 m 20/m
20 mm Aggregate 3000 m 19/m pendiure Xpendnu
Oil 10 litres 100/litre |Cement 4,90,000 4.90.000 76.560
Sand 3000m 20/m3 Bricks 95,000 5,85,.000 91.40 20
Soludon:The cost of each item is as follows Tiles 30.000 6.15.000 96.09

Number as Pe Dry Distemper 12,000 6.27,000 97.96

nnu
oil 10.000 6,37.000 99.53 50 C
onsumption Descending order
Nails 3000 6,40.000 100 Le
Now, ABC Curve,
1. Water 1,600
2 Cement 6,00,000 100t
90-
Fly ash 7,500
Torsteel
2,00,000
Mild steel 76,000
Nails 1.500
12 mm Aggregates
60,000 30
20 mm Aggregates 20
57,000 10
1,000 10 20 30 40 50 60 70 8o 90 100
Sand
60,000 % Item
Fig. 3.18:ABC curve
 MANAGEMEN
Solution: Now Find out various parameters
Example 3.15: Perform ABC analysis forfollowing data:
Cost ReCum.Annum
[Nov. 15, 8M] St No
tem Annual Expenditure
4,90,000 1 Cement1,80.000 1,80,000 39.05 14.28
1 tem
2. Sand 35,000 2,15,000 46.64 28.58
Cement 90,000
Steel 1,49,000 3,64,000 78.97 42.86
Tiles 95,000
Bricks 2,60,000 Aggregates 90,000 454,000 98.50 57.14
Sand 1,20,000 Nail 3200 4,57,700 99.19 71.41
Oil 2,000 Water 2500 4,59,700 99.73 85.69
Timber 30,000 7.Containers 1200 L 460,900 100 100 C
8. Nails 3,000 Now drawn ABC curve

9. Dry distamper 15,000

Solution: Arange the items as per descending order of their 100
Cost:
30
Annual Cum. Annum Cum %of AB/C 70
Expenditure Expenditure Cost tem 60
1. Cement 4,90,000 4,90,000 44.3 11.1 A
50t
2. Sand
2,60.000 7,50,000 67.87 22.2 40t
3 Stee 1,20,000 8,70,000 78.7 33.3 B Class Class
4. Bricks 95.000 9,65,000 87.3 44.4 B 20
5. Tiless 90,000 10.55,000 95.4755.5 C
10t/
o 10 20 30 40 50 60 70 80 90 100
. Larmber 30,000 10,85,000 98.15 66.6 Item
7. Dry distemper 15.000 11.00,000 99.55 7.7 C
Fig. 3.20: ABCcurve
8. Nais 3000 11,03,000 9.82 88.8 C Example 3.17: Following table shows the annual consumption
9.Oi 2000 11.05,000 100 100 C the items used in a project and their unit cost Classify them AE
in
100
Cclasses and plotthe ABC analysiscurve. INov. 16,
tem No. AnnualConsumption in Unit Unit Cost(
90
804 12000 3.00
70 22000 2.50
60 1900 1.70
50 45000
40 2.80
30 Class 5 3500 1.70
Class
20 Çlass 60000 1.50
9000 2.0
10 20 30 40 50 60 70 80 90 100
%tem
32000 3.0
Solution:
Fig. 3.19: ABC curve
tem No. Annua Unit Cost Total Annual Per Desc
Example 3.16: Following table shows annual expenditure
of the
material used in a construction project. Clossify them in A,
B, C Consumption (RS) Cost
classes and plot the ABC Curve. [May 16, 6M] in Unit (n Rs
S. No em Costin Rs 1 12000 3.00
36,000 5
Cenent 1,80,000 2 22000 2.50
2. Stand
55,000
36,000 1900 1.70
Steel 3,230
149,000
4. 45000 2.80
1,26,000
Aggregates 90,000
3500
5. Nail 3,200 1.70 5,950
. Water 2,500 60000 1.50 90,000 3

. Containers 1,200 9000 2.0 1,800 8

32000 3.0
= 96,000 2
NNING PROJECT MANAGEMENT&ENGINEERING ECONOMICS (TE CrVIL) (3.21)y PROJECT RESOURCES AND SITE PLANNING
Arrange the materials as perthedescending order of their costs AZKZ Z ZSZ
ABIC 3.14 AVOIDING MISUSE AND WASTAGE
fem Anhual Cumulative Annual Cumulative A/BIC The wastage of material varies from 2% to 10%
Cost Cost Percentage Cost depending upon
construction activity. Also, sometimes materials are misused on
1,26,000 1,26,000 30.43 site.
96,000 2,22,000 53.6 Misuse of the material may be due to the
90,000 3,12,000 75.36 following
Thefts.
55,000 3,67,000 88.65
36,000 4,03,000 97.34 Negligence.
C Careless wor
C 5,950 4,08,950 98.78 C
C 3,230 4,12,180 99.56 Improper handling.
1,800 4,13,980 100 No or
improper record keeping.
C
Storing in excess of the requirements.
120
Wastage.
100
Proper precautions may be taken to avoid misuse.
30 The wastage in general is again due to following reason.
60 Careless work: Wastage consumption
in
40+ Absence of planning:
20 Excesspurchase and inventory
2 Wrong purchase
Obsolescence
Fig.3.21: ABC curve
Example 3.18: Carry out A-B-C analysis for the following Deterioration due to no use for long time.

Dtion of construction items and plot ABCcurve [May 17, 8M Improperhandling:

in AB item Annual Improper storage
6, 8M Expenditure (Rs. Faulty storage
(RS Cement 6,00,000 Improper arrangement for transportation from store
Sand 3,90,000 to the actual work site.
Bricks 1,20,000 All the above causes of misuse and wastage can be avoidedby
Paint 90,000 adopting new techniques of materials
management and proper
Steel 5,00,000 procedures of purchasing, storing and handling. Capital cost
Oil
.4,000 locked in the purchase of materials can be reduced and in turn

Course Aggregate 1,00,000 profits be increased.

Solution: 3.15 FLEET MANAGEMENT
annua Cumulati Cum tem Al 3.15.1 Introduction
Ependiture Annual Cost KFleet management is the function that oversees, coordinates
Expenditure and facilitates various transport and transport related
CTE 600000 600000 33.26 14.28 activities.
2 Sleel 500000 1100000 60.97 28.57 It covers vehicles involved in the movement of goods; the
Sand 380000 1490000 82.59 42.86 B
management of light vehicle; fleets used in the transportation
Bricks 120000 1610000 89,24 57.14 of people and light cargo.
Course Aga 100000 1710000 94.78 71.43 Vehicles are valuable assets and critical for business
Paint 90000 1800000 99.77 85.71 continuity. Especially. in construction field, very heavy
4000 1804000 100 100 C
Assuming, vehicles are used. Around 10-20% of the total costis
sContributed by vehicles and its operating cost.
Acategory within = 0-30%
5 Proper fleet management will ensure optimizing this cost
category within 30-60% =

thus benefitting the organization. They therefore require

category within= 60-100%
adequate attention.
OJECTNLANAGEMENT 8 ENGINEERINGECONOIL
3. Insurance

management aims at reducing and minimizing should be given to the fom

Effective fleet
maximum, cost effective
utilization of Careful consideration form
overall costs through insurance selected
for the vehicles belonging to
resources such as vehicles, fuel, spare parts, etc. The minimum requirements of the
of fleet is very organisation.
The administration and financial management
must always be complied with; this is usually at la
organisational specific.i third party cover.
At a glance, some vehicles are restricted to specific projects,
are To ensure compliance with the vehicle insuran
others are utilised in pools to serve all projects, some operation vehie
driver driven and others self-staff
requiremets, all personnel using
strictly organisational under the responsibility of the organisation mustbef
driven and coordinated in pools. conversat with accident and incident repor
3.15.2 Aspects ofFleet Management procedures for vehicles and personal injury.
Some of the aspects of fleet Management described below. Personnel requirements the insurance cover
1. Identifying needs personnel will depend on the type of policy
2. Acquisition Process organisation takes to cover its vehicles: third party,th
3. Insurance party fire and theft, comprehensive or liability insurance
4. Vehicle leasing Intermal and external) Rent or coverage for leased
outsource: insurance
5. Vehicle Management outsourced vehicles will be dependent upon what
.Fleet management systems organisation negotiates with the service provider.
Vehicle maintenance and up-keep organisation will either adopt the service proide
6. Vehicle usage insurance as-is or
adopt it with amendments
Vehicle disposal
alternative is to completely outsource the
management, but again the type of insurance wil
7. Health Safety and Security
dependent upon what is negotiated with the senvic
Complying with Legislature and security requirements
provider.
Drivers
1 ldentifying Needs
4. Leasing (Internal and External)
Vehicle
"A vehicle or asset lease is a contract
dentification of fleet needs is dependent on the nature of by which one party
vehicles or assets to another party for a specified
emergency and operations, and the size and area of operation. period of time
Vehide selection criteria are guided by: Or
"A lease is a written
Uniformity offleet, agreement by which one party agrees to
The appropriate vehide type for local fuel another party have the use of specified assets for a period of ti
availability for fixed
The purpose of the vehicde (type of material
a
amount money".
of
handled In an external leasing option, the ownership could
The terrain in which the vehide will
operate;
Remain with the
Global acquisition cost leasing company or entity, DuE
Availability of local dealers; rights for use are passed on to the lessee for the pen
of the lease
Local availability of spare parts for the intended
vehicle; In other cases, at
Warranties, and the expiry of the lease, the ownersn
Local availability of competent mechanics.
transferred to the lessee, and
The
Depending on the level of emergency the criteria ownership remains with the lessee, but manag
may vary. of some
2. Acquisition Process aspects such as maintenance, could remaun
the
leasing company depending on
Thegeneral criteria for selection of a vehicle would be negotiations.
conformity with the standard recommended vehicles. innare
Internal leasing, the
organisation itself owns the vehicles
icles wh
.The standard tender process is adopted for vehicles, as
centrally managed and issued
basis. Organisations therefore budget
to for leasing costs onlyrecove
programs on acost
for all other goods and services, bulk Items
and items
bought on a regular basis. In some cases, the process
Advantages of Leasing
may result in outsourcing of some aspects of the vehicle Routine repair or
leasing costs. maintenance costs are
management or leasing
ofehicles p

No
overheads in garage set-up and
maintenan
 ogOJECTMANAGEMENT &ENGINEERING ECONOMICS TE CIVIL) (3.23)
No high initial purchase items in lessee's books.
The leassor bears most of the risk.
The organisation is able to focus on core business.
Disadvanteges of Leasing
.The organisation losses control of some aspects of ts
fleet management.
Discontinuation of services by the service provider can
cause huge disruptions in the day-to-day operations.
PROJECT RESOURCES AND sITEPLANNING
Fuel can be purchased from a central petrol station and a
receipt issued. Where there is no appointed petrol station,
the vehicle fuel request form is completed and approved
before funds are released for fuelling. Should the drver have
to purchase fuel from their own funds or petty cash, the
amount spent on the purchase will be reimbursed;
All vehicle keys are surrendered at the end of the day,
Drivers adhere to the carrying capacity as provided by the

If the leasing contract is cancelled for any reason, the

traffic law
organisation may have to make heavy investments in No unauthorized staff member is allowed to drive vehicles.

vehicle purchases or temporary hire to ensure business Vehicles will be assigned at the discretion of the approving
officer; and
continuity.
e
The organisation would not be able to build up any All new staff (those who have a driving license but have not
institutional capacity in fleet management. driven for a specified period), will not be allowed to drive the
organisation's vehicles unless accompanied by a qualifed
5. Vehicle Management
driver or have been re-tested by the registered automobile
The location of the ehicle management function within
e association and authorized to drive.
organizations' structures varies from organisation to
he organisation. The management may be located within
(a) Fleet Management Systems
evit
administration, function
transport or have an In recent times, to address problems in fleet management and the
An
independent fleet manager. For the purpose of the ever expanding need to monitor usage of vehicles, commercial
et
Logistics Operations Guide the manager will be referred organisations have designed automated control systems and
be
ice
to as the feet manager (FM).s cfpeert ne se other approaches to vehicle management. Simple management
Vehicies expensive but critical to
are an
organisations systems can be designed in-house for internal use to provide a
operation. They facilitate the movement of personnel good analysis of the vehicles and driver performance. Vehicle
and the delivery of relief supplies to beneficiaries. management systems are structured in a way that enables the
ets Vehicle management is also one of the aspects of
supply capturing of information on various aspects of fleet usage,
management that can be easily abused if not properly
maintenance and operations. For example
managed. f properly managed this aspect would
Distances travelled;
ensure
Destinations reached;
me Availability of vehicles as and when required;
Cost efficiency, Distance travelled by vehicle showing official and private
Programme or response continuity, mileage;
he Staff safetyy Fuel consumption;
iod Safety on the roads; Repair and maintenance per vehicle;
Vehicle safety Rate of consumption of spare parts; and
Vehicde security, and
Servicing planned and completed.
Performance management.
em The reports can be produced
weekly, monthly cr bi-monthly
on a
0 achieve the above, some of the measures taken by the FM
it are: basis, depending on the needs of the organisation. Weekly
reports may comprise a summary weekly refuelling by vehicle
Every vehicle caries a logbook
ich which may highlight any exceptions to targets set per vehicle,
Logbooks are checked on a weekly basis whereas
ery monthly reports may comprise:
vehicles are logged out and signed for before every trip. A
vehide allocation chart Summary refuelling by vehicle and average fuel consumption;
is recommended;
he driver records all fuel and maintenance costs in the log Summary mileage per vehicle;
nto 0OK or fuel request and purchase voucher, indicating the Repairs or maintenance; and
reading the odometer at the time of the
on
expense Any accidents.
 Routine Maintenance
(b) Vehicle Maintenance and Up-Keep
is done on a monthly basis. It mai
Maintenance This type of maintenance mayc
the following:
Vehicles are regularly maintained for optimum performance, and The vehicle supervisor should periodically organise
kept in good repair, In emergency situations the Logistician is drive each vehicle and report on its condition and also
sometimes tasked with the responsibility of managing the vehicle
that normal/regular service has been done for all vehic
fleet. To streamline vehicle management the FM should put in
Tyres: any abnormal wearing should be reported to the
place a simple process. Such a process could entail the following
Maintenance Options and
month.
Cleaning of the engine at least once
a
There are three main options;
In emergency situations, in the absence of local faciltie
) "In house maintenance" performed using the facilities and
organisation would have to undertake its own maintenance
staff of the organisation.
ensure that
) Outsourced maintenance" under taken by an outside
An experienced mechanic is hired;
contractor.
(i). "Contract hire": undertaken by an outside contractor as part A secure workshop area is identified or set up
of
a vehicle operating system. The necessary tool and equipment are available
It will be necessary to review the operational-requirements and There is continuous performance monitoring and a s
match the most suitable form of maintenance to the individual for measuring and monitoring
operation. Whichever mix is selected, it must be preventative and Fleet performance;
must be under the control of a competent manager; if it is not,
Costs and performance.
the condition of the vehicles may quickly decline and running
costs may increase
Selection of Garage
Based on the organization's needs, the criteria for selectiond
Maintenance Planning
right garage is set with the input of the Logistics officer and
Whichever maintenance options is followed, vehicle maintenance FM, keeping in mind the organizations approved procure
schedules must be drawn up together with, and published by the
Procedures.
FM part of the vehicle planning. All members of the
as
Basic Spare Parts in a Workshop
management team must make a commitment to respecting the
Should the organisation decide to manage its ve
scheduled dates for maintenance.
293t2O maintenance in-house, certain fast moving spares
A master vehide inspection and servicing schedule should recommended for stocking. This reduces vehicle down-time
be
number of vehicles owned by the organisation will
drawn up for one year -a
wall chart is recommended. This chart determin
purchase of these parts and equipment.
can also be used to show road tax renewal, annual
inspection Maintenance Documentation
dates, etc.
Vehicle Maintenance Summary
The person responsible for the condition of the vehicles must
: whoever maintains
vehicles must make a detailed written servicing record
decide the scope of the servicing vwork required and how often listing the work done, parts and fuids used and
this should be carried out taking ito account the manufacturer's incurred on each job. The FM must this
keep o
guidelines and kilometres travelled and in which type of individual vehicle file.
environment the vehicle has been used. Workshop Job Cards: when the written order is rec
the workshop raises a workshop job card' for each
Preventative Maintenance
entering for inspection, service or defect rectification
This is done on a ongoing basis. This type
of maintenance should not be carried out without a job card; ea
should include the
addresses the basic things that could cause a problem in vehicles following information:
if they property maintained. The Logistician or FM
are not Details of all work required to be carried out
develops an inspection check-list to be used by all drivers as a Actual work carried out
Name of staff and hours worked;
guide
Details of spare parts and materials used; and
Each day, the first driver to us a vehicle will inspect the vehicle
Space for the cost of the work
using the check-list.
Once all relevant information has
been taken from te
they should then be filed with the vehicle files.
 PROJECTRESOURC
JECT MANAGEMENT
&ENGINEERING ECONOMICS (TE CVML) 25)
DsITE PLANNING Communication equipments fitted into vehicles;
ocumentationgeneral vehicle
PROE

and
Files
Vehicle
files should be maintained
for each vehicle. Duties and taxes
pondence allow the re-
some countries do not
basis. It may contain the following documents to facilitate Return of vehicles
cove This
file
should

expenditure
and maintenance: export of vehicles;
tracking of Safety requirements; and
y organisSe request
a
tes Copies ofpurchase vehicle cannot operate outside a
on and also of internal
service request;
Vehicle jurisdiction some

ensun
for all vehicles; Copy
specified area.
local purchase order;
Copy of of health and safety is the
reported to the FM >Invoice;
The key to successful observance
culture of awareness of, and
(bill of lading, etc): development of an organisational
Allimportant documentations issues. To ensure that this is
nth. compliance with health and safety
Insurance papers; document must be practical
local facilities, the possible the Health and Safety policy
bills;
mmaintenance an Copies of all repair and be incorporated within day to day tasks. Some organisations
Job order routine minor repairs and service workshops.
manage their own
Accident report and Some basic health and safety measures
for workshops would be
F u e l log-in sheets. Clear environments around work stations;
et up;
where risks
Completed risk assessments and action taken
are

ailable; &Vehide Usage

toring and a systen
for selection of the
gistics officer and te
pproved proauremet
its vehie
spares
ehide down-time. Te
wil determine the
ion
hoever maintains
Ris necessary
to have a clearly defined policy regarding
vehicle
highlighted, ie. warning tape on raised flooring
benefits. Most organisations do not have the
usage and staff Inductions;
a driver for each vehicle that they own.
to assign Practice drills for fire evacuation; and
apacity
authorised to self drive,
Under these circumstances, staff may be Availability of and mandatory use of safety equipment
such a
would in most cases be pooled and
ahter testing. The vehicles etc.
goggles, boots, gloves,
rotated based on needs, except where a specific donor
For Drivers
equirement conditions ties a vehicle to a specific project. drivers into
vehicles utilised for office operations As part of fleet management it is necessary to divide
practical reasons, light are
evaluation
and within urban settings and heavy vehicles for field based
categories based on skills and competence. Constant
of their skills, regular training and refresher courses will improve
operations reduce number of accidents and
driver and vehicle performance,
Velhidle Disposa reduce maintenance costs. Each organization has the
unning old vehicles may lead to high costs of maintenance and responsibility of identifying relevant training and courses
neconomical fuel consumption. To avoid this, organisations
available. These could be included in organizational capacity
shoud have approved and clearly stipulated policies and
building programs for drivers.
procedures on how and when to replace and dispose of
WElesassets. The need to dispose may arise due to any of the 3:16 PRODUCTMTY STUDIES
foklowing reasons The productivity of any construction equipment is a term that

eviing record repor a sesut of extensive unrepairable damage, or cost- indicates how many units of output the equipment produces
in an hour depending on the job conditions and
uids used and cos prohibitive repairs,
st keep this on When the vehicde attains the stipulated mileage or years for management as well as the persisternce and
operators skil,
co-ordination with other construction forces. In simple terms,
receive
disposat,
order is productivity refers to the ratio of output versus input
ten vehi
When the vethide is
longer economically sustainable,
no
card' for each
Output here has to be of specified quality produced within
ect rectification. Wo When the vehicle is no-longer required; and s.tteohe
When progranms downscale scheduled time. Input are the resources deployed for
job card; each or shut down.
1. achieving the desired output
n: Mealtdh, Safery and Security
arried out e sefety is one of the key roles of the FM. It leads to staff Productivity is useful as a relative measure of actual output of
sahety and enhances road safety. Legislature and security production compared to the actual input of resources,
uirements are country specific and may relate to: measured across time or against common entities. As output

5 used; and Driving authorisation documents, increases for a level of input, or as the amount of input
Type of vehicle allowed; decreases for a constant level of output, an increase in
car
en from
the job Size of vehicles; productivity occurs.

ES.
 PROJECT RESOURCES AND SITE PLAN

ENGINEERING ECONOMICS (TE CIVIL) (3.26) PLANNING

PROJECT MÄNAGEMENT &
measure" desctibes how well
the 3.16.1 Types of Productivity
Therefore, "productivity
a can be More specifically
classified depending u
are being used
to produce Productivity
resources of an organization follows :
its applications and degree
as

input.

IcatiOp
egi

Labour Enery Panla Muiti facto Total

Fig. 3.22

Example 3.20: A team of workers make 500 units ofa prod

These types are briefily explained as below:
F400 for labor and ?2u
Labour Productivity: Units of output per labor hour or having cost of F10 each. Actual cost is
material and ?500 for overheads, calculate
the productivity
Units of output per shift for
Equipment Productivity : Units of output per machine hour Solution:

orOutput per unit machine. na sidns (500 units)(10/unit)

Multifactor productivIty 400 + 2000 500
Energy Productivity: Units of output per kilowatt- hour or
5000
Rupee value of output per kilowate-hour 29001.72

Partial Productivity : it measures output against a specific

3.16.2 Overall Equipment Effectiveness (OEE) [MayE
inpust eg. items made/empioyee. It is concerned with
efficiency of one particular characteristic. Another measure of productivity is defined as Overal equipme
eavis effectiveness (OEE) which reports the overal utilizationg
Multifactor Productivity: it is ratio of output to a group of
facilities, time and material for manufacturing operations
inpurtssuch as labor and material. Hence, it is an index of
quantifies how well a manufacturing unt performs relative to
output obtained from more than one of the resources used
designed capacity, during the periods when it is scheduled tor
irinproductionor service. OEE breaks the performance of a manufacturing unit into th
Output Output
Multifactor productivtyJabour +.machine labour + energy separate butmeasurable components: Availability, Performans
and Quality. e
Total Productivity : it includes all inputs in an organization
ie. labor, materials, overheads, capital. Hence, it is the1 Availabilityaet
broadest measure of production and is concerned with the Availability takes into account Down Time Loss, which inclu
perfomance of entire plant/ organization. allevents that stop planned production for an appreciable le
of time (typically several minutes or
Total Productivity Revenues,Profits/Allinputs longer).
Examples 3.19: Determine the MFP for the combined input of It is calculated as the ratio of Operating Time to Plani
laborand machine time using the following data : Production Time, where Operating Time is simply Plan
Output: 7040 units 1 0 each Production Time less Down Time.
2. Performance
Input
-- Labor: 1000 Performance takes into account
Speed Loss, which incudes
factors that the
- Materials:7520 cause
production asset to operate at less than
maximum possible speed when
-- Overhead: F2000
running.
It is calculated as the ratio of
Solution Gi Net Operating Time
erati
to opee
Time. In practice, it is calculated as
Multifactor productivity Labour + Output (ldeal Cycle Time x Total Pieces)/
Materials+Overhead Ideal Cycle Time is the
Operating Time
7040 units x 10 theoretical fastest possible
me

1000+ 520 2000 manufacture T

one piece. Therefore, when it is by
,
=
20 units output/ input Pieces the result is Net multipliedd faste

Operating Time the theoretica

possible time to manufacture the total
quantity of piece