CONSTRUCTION MANAGEMENT

MODULE - IV

Resources Management & Allocation :

4.1 Material Management- Importance, objectives, functions of material
management, Inventory control, A-B-C analysis, E.O.Q etc.
4.2 Human Resource Management- Manpower planning, recruitment, Selection
training, performance evaluation of worker etc.
4.3 Resources Allocation Methods- Resource levelling resource smoothening.
 Material Management - Introduction

Material management is an approach for planning, organizing, and controlling all

those activities principally concerned with the flow of materials into an organization.
The scope of Materials Management varies greatly from company to company and
may include material planning and control, production planning, Purchasing,
inventory control, in-plant materials movement, and waste management.
 What is Materials Management

Coordinating function that balances the conflicting objectives of marketing,

production, and finance by managing the flow of Materials.
Balancing the Resources of the company with Customer Demand
 Role of Materials Management

Make the best use of company resources

Provide the desired level of customer service (demand)

 Purpose of Material Management

To gain economy in purchasing

To satisfy the demand during period of replenishment
To carry reserve stock to avoid stock out
To stabilize fluctuations in consumption
To provide reasonable level of client services
 Objective of Material Management

Primary Secondary
Right price Forecasting
High turnover Inter-departmental harmony
Low procurement & storage cost Product improvement
Continuity of supply Standardization
Consistency in quality Make or buy decision
Good supplier relations New materials & products
Development of personnel Favourable reciprocal relationships
Good information system
 Material Management Functions

Material planning and programming

Purchasing and outsourcing

Inventory control

Store keeping and warehousing

Codification
Basic Principles of Material Management

1. Effective management & supervision

It depends on managerial functions of Planning
Organizing, Staffing, Directing, Controlling, Reporting, Budgeting
2. Sound purchasing methods
3.Skillful & hard poised negotiations
4.Effective purchase system
5.Should be simple
6.Must not increase other costs
7.Simple inventory control programme
Elements of Material Management

Demand estimation

Identify the needed items

Calculate from the trends in Consumption during last 2 years.

Review with resource constraints

 Advantages of Material Management

Reduced operating costs and timely production.

Greater job satisfaction on the part of both the workers and the employer.

Every inch of the space is properly utilized.

The issue of materials is also facilitated.

It helps in maintaining effective production planning and control.

 Material Management

Material management is an important management tool which will be very useful in

getting the right quality & right quantity of supplies at right time, having good
inventory control & adopting sound methods of condemnation & disposal will improve
the efficiency of the organization & also make the working atmosphere healthy any
type of organization, whether it is Private, Government ,Small organization, Big
organization and Household.

Even a common man must know the basics of material management so that he can get
the best of the available resources and make it a habit to adopt the principles of material
management in all our daily activities
ABC CLASSIFICATION.
HML CLASSIFICATION.
VED CLASSIFICATION.
SDE CLASSIFICATION.
FSN CLASSIFICATION.
EOQ CLASSIFICSTON.
MAX-MINIMUM SYSTEM.
TWO BIN SYSTEM
ABC CLASSIFICATION.
One of the widely used techniques.
Objective is to vary the expenses associated with control , according to potential savings
associated with a proper level of control.
The ABC approach means of categorizing the inventory items into three classes
„A‟;‟B‟;‟C‟.
The categorizing is done according to the turnover of the various products.
ABC CLASSIFICATION.
ABC inventory analysis is a method used to classify a business's stock items into three
categories – A, B and C, based on their value to the business. A items are the most
important in terms of the value they bring a company, whilst C items are the least
valuable
In materials management, the ABC analysis is an inventory categorization technique.
ABC analysis divides an inventory into three categories—"A items" with very tight
control and accurate records, "B items" with less tightly controlled and good records, and
"C items" with the simplest controls possible and minimal records.
 A B C Analysis

Procedure.
List each inventory by number or by designation.

Determine annual vol of usage and money value.

Multiply each item annual vol of usage and rupee value.

Select top 10 percent of all items which have high repee percentage classify them
as „ A‟. And accordingly.
Example: A B C Analysis
Inventory Item Annual use Percentage of
total
usage

101 3,000 0.3

106 4,00,000 40.0

117 7,000 0.7

 Economic Order Quantity (EOQ)

Economic order quantity (EOQ) is the ideal order quantity a company should
purchase to minimize inventory costs such as holding costs, shortage costs, and
order costs. This production-scheduling model was developed in 1913 by Ford W.
Harris and has been refined over time. The formula assumes that demand,
ordering, and holding costs all remain constant.
The EOQ is a company's optimal order quantity that minimizes its total costs
related to ordering, receiving, and holding inventory.
The EOQ formula is best applied in situations where demand, ordering, and
holding costs remain constant over time.
 Economic Order Quantity (EOQ)

Formula and Calculation of Economic Order Quantity (EOQ)

The formula for EOQ is:

Q=Sq. Root (2DS/H)

where:Q=EOQ units, D=Demand in units (typically on an annual basis)

S=Order cost (per purchase order)
H=Holding costs (per unit, per year)
 Economic Order Quantity (EOQ)

Example of How to Use EOQ

EOQ takes into account the timing of reordering, the cost incurred to place an
order, and the cost to store merchandise. If a company is constantly placing small
orders to maintain a specific inventory level, the ordering costs are higher, and
there is a need for additional storage space.
Assume, for example, a retail clothing shop carries a line of men’s jeans, and the
shop sells 1,000 pairs of jeans each year. It costs the company $5 per year to hold
a pair of jeans in inventory, and the fixed cost to place an order is $2.
 Economic Order Quantity (EOQ)

Example of How to Use EOQ

The EOQ formula is the square root of (2 x 1,000 pairs x $2 order cost) / ($5
holding cost) or 28.3 with rounding. The ideal order size to minimize costs and
meet customer demand is slightly more than 28 pairs of jeans. A more complex
portion of the EOQ formula provides the reorder point.
 Economic Order Quantity (EOQ)

Limitations of Using EOQ

The EOQ formula assumes that consumer demand is constant. The calculation
also assumes that both ordering and holding costs remain constant. This fact
makes it difficult or impossible for the formula to account for business events such
as changing consumer demand, seasonal changes in inventory costs, lost sales
revenue due to inventory shortages, or purchase discounts a company might
realize for buying inventory in larger quantities.
 Resource Planning and Resource Allocation

Manpower, equipment, and materials are important project resources that require
management attention.
The basic objective of resource planning and resource allocation is to supply and
support the field operations.
The term resource allocation is used in the case where required resources are assigned
such that available resources are not exceeded.
 Resource

Resources are the means of production needed to complete a project.

Most project managers would consider the big three resources that will require your
attention to be:
Material
Labor
Equipment
A. LABOUR
a. In the limited resource allocation case, there are two assumptions:
●There are a fixed number of crews available to perform the work and
●The project may be delayed as a result of the limitation of crews.
The objective of the resource allocation problem is to determine when the
project will be completed.

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b. In the unlimited resource levelling case, there are two assumptions:
1. There are an unlimited number of crews available to perform the work and
The project may not be delayed.
2. The objective of the resource levelling problem is to determine how to
limit the fluctuation in crews required on the job.

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B. MATERIALS
Materials, for projects with sufficient on-site storage, are delivered to the site
and assumed to be available to workers as needed.

A material-related concern for sites that have sufficient space is that of

optimizing the position of materials on the site so that they require the least
travel time from the lay-down yard to the work-face.

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C. Equipments
There are various types of equipment used on construction sites.
Some of this equipment should be considered in the project plan, some need
not be included.
Workers, and their companies, are typically required to provide the small
tools needed to complete their specific features of work.
There are some types of equipment, however, that can affect the overall
sequence and duration of the project.

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Resource allocation is used to assign the available resources in an
economic way.
It is part of resource management.
In project management, resource allocation is the scheduling of activities
and the resources required by those activities while taking into
consideration both the resource availability and the project time.

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Resource planning cannot be accomplished without four essential
resources necessary to accomplish the given scope of work:
MATERIAL
MAN POWER
MACHINARY
TIME

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Human resources for construction planning breaks down
into three major categories as follows:
●Home office personnel(Administrative Persons)
●Construction personnel (field supervision and labor)
●Construction subcontractors(Electrification, Plumbing,
etc)

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