CHAPTER ONE

INTRODUCTION

1. BACKGROUND OF STUDY

Building materials constitute a major cost component for a construction project. Efficient material management and inventory control strategies are at the top and help in achieving the cost reduction goals. It is extremely essential for smooth running of construction work. A proper plan for raw materials, handling, storage, issuance, and recording purchases is considered as part of inventory management. Investments are very much in investment, investment in the majority of investment companies. Therefore, a proper plan of purchase, handling, conservation and accounting should be formed in an effective inventory management system.

The term inventory means stock for products alternately a rundown of merchandise. Inventory means a stock of tangible assets or goods, it can be stock of completed products prepared for sale, raw materials organized for manufacturing, work in progress and consumables, spare, store etc. A correct arrangement for purchasing, conservation, usage and recording is to be viewed as an element of inventory management. Stock administration acknowledges what to be purchased, how to be purchased, the extent to which it should be purchased, starting with the place it should be purchased, the place to store and the point when to utilize it for construction.

The term inventory can also be said to the goods or materials used by a firm for the purpose of production and sale. It also includes the items, which are used as supportive materials to facilitate production. Nearly 60% of money is allotted for the inventory in a project. Inventory constitutes one of the important items of current assets, which permits smooth operation of production and sale process of a firm. Inventory management is that aspect of current assets management, which is concerned with maintaining optimum investment in inventory and applying effective control system so as to minimize the total inventory cost. Materials Management is related to planning, procuring, storing and providing the appropriate material of right quality, right quantity at right place in right time so as to co-ordinate and schedule the production activity in an integrative way for an industrial undertaking. Inventory Management is simply the process by which an organization is supplied with the goods and services that it needs to achieve its objectives of buying, storage and movement of materials. Inventory is seen as incurring costs, or waste, instead of adding and storing value, contrary to traditional accounting. Inventory management is the supervision of non-capitalized assets (inventory) and stock items. A component of supply chain management, inventory management supervises the flow of goods from manufacturers to warehouses and from these facilities to point of sale. A key function of inventory management is to keep a detailed record of each new or returned product as it enters or leaves a warehouse or point of sale.

Materials and inventory management plays a definite role throughout construction process. It is because construction materials contributed 50-60% of the total project costs (Song, 2005 and Nasir, 2008). Materials and inventory management is important especially in large and complex construction projects where there is significant amount of money invested in every single process. Materials and inventory management on-site are made complicated as increasing in project size and complexity.

In construction project, the tracking and locating of materials at the construction jobsites are the most important problems related to construction materials and inventory management (Song, 2005; Navon & Berkovich, 2006; Nasir, 2008). Materials’ tracking and locating is important to ensure that materials are available at the right time, in the right place (Song, 2005), and at the quantity required. Issues regarding the tracking and locating of materials on-site have received a great concern in construction industry as materials always come in bulk without proper identification. The improper or inadequate

Material management is characterized with providing the correct material which is required at the construction site at correct time it involves identifying, arranging, procuring and storing of the materials. The reason for inventory supervision is to keep stocks over such an approach that there is no overstocking which means deficient of liquidity or under loading which brings about stoppage for work. In early days, material administration was not of greater significance as the materials were purchased depending on their requirement and availability of money. As the years passed proper plan and control techniques were developed for the smooth flow of the construction activities, minimize the waste, completion of project within specified time frame and to reduce the overall cost of the project. Techniques such as EOQ analysis, ABC analysis, S-curve analysis, VED analysis, HML analysis etc. were developed for quantity and quality analysis.

1. STATEMENT OF THE PROBLEM

No researcher has carried out a research on inventory control of building materials on construction sites, most research were done mainly on improving on-site materials tracking projects. Little wonder Kini (1999) pointed out that 50~60% of the total construction cost goes to materials and equipment.  Some construction Project may experience project cost for material ranged from 30 to 80% of the total construction cost (Proverb, et al., 1999) It is therefore vital to control this large portion of tangible cost, and every penny save will contribute to the profitability of the project.  Inventory Control and waste Control on site remains a low priority for the majority of the contractors (Begum, 2009).  When construction site is less concerned on inventory control more materials and labour times are wasted. An estimated about 10 to 30 per cent of wastes disposed of for landfills originate from construction site (Fishbein, 1998). Many contractor and developer do not take advantage on this saving and look for other means of getting extra earning and risk to be penalized for using inferior materials or maybe cut corner here and there; hence, the reason for carrying out this research.

1. AIMS AND OBJECTIVES

The main aim of this study is inventory control of building materials on construction sites. Other specific objectives include:

1. to determine the relationship between inventory control of building materials and construction sites.

2. to examine the need of inventory control in construction sites.

3. to identify  inventory control model best suit in construction sites.

4. to identify Problems associated with inventory control  in construction sites.

5. to examine measures for managing building materials in construction sites.

 6. to identify suitable suggestions for the improvement of inventory control practices & to Minimize wastage of building materials in construction sites.

1. RESEARCH QUESTION

1. What is the relationship between inventory control of building materials and construction sites?

2. Why the need of inventory control in construction sites?

3. What inventory control model is best suited in construction sites?

4. What are the Problems associated with inventory control in construction sites?

5. What are the measures for managing building materials in construction sites?

6. What suggestions are suitable for the improvement of inventory control practices & to Minimize wastage of building materials in construction sites?

1. STATEMENT OF RESEARCH HYPOTHESIS

1. H0: inventory control of building materials has no significant effect on construction sites.

2. H1: inventory control of building materials has a significant effect on construction sites.

1. SIGNIFICANCE OF STUDY

Inventory control is something that should be front-of-mind in building project.  Many Project Manager neglected the importance of site Inventory control, which lead to lot of wastages in term of material wastage, labour working hour wasted due to “stock out” or search for material, pay higher price to require immediate supply of specific material.  Poor storage give rise to materials deteriorate, damage due to poor storage method, and lost (theft).

This research will generate the awareness of importance of Inventory Control at the construction site.  It serves to awake the Project Management team to space some effort to emphasis on Material Inventory Control so as to increase the profitability of the project concerned.

This research will give awareness for builders to look seriously on inventory control where saving of materials and labour times can impact the profitability of the project.

The significance of this research paper will look for solution, method, and means of control to tighten up the inventory process for the benefit of the construction industry.

The importance of this study will help construction industry understand that materials management lies in the fact that any significant contribution made by the materials manager in reducing materials cost will go a long way in improving the profitability and the rate of return on investment

Lastly, the study can be used as a reference point for further research.

1. SCOPE OF STUDY

The scope of study will cover inventory control of building materials on construction sites.

1. LIMITATION OF STUDY

1. Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

2. Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1. DEFINITION OF TERMS

Inventory control: Inventory control or stock control can be broadly defined as "the activity of checking a shop’s stock. An inventory control system is a system that encompasses all aspects of managing a company's inventories; purchasing, shipping, receiving, tracking, warehousing and storage, turnover, and reordering.

Building materials: Building material is any material which is used for construction purposes. Many naturally occurring substances, such as clay, rocks, sand, and wood, even twigs and leaves, have been used to construct buildings.

Construction sites: A construction site is an area or piece of land on which construction works are being carried out. Or simply put a building site or place.