Materials management is an important element in project planning and control. Materials represent a major expense in construction, so minimizing procurement or purchase costs presents important opportunities for reducing costs. Poor materials management can also result in large and avoidable costs during construction.
First, if materials are purchased early, capital may be tied up and interest charges incurred on the excess inventory of materials. Even worse, materials may deteriorate during storage or be stolen unless special care is taken. For example, electrical equipment often must be stored in waterproof locations. Second, delays and extra expenses may be incurred if materials required for particular activities are not available. Accordingly, insuring a timely flow of material is an important concern of project managers.
Materials management is not just a concern during the monitoring stage in which construction is taking place. Decisions about material procurement may also be required during the initial planning and scheduling stages. For example, activities can be inserted in the project schedule to represent purchasing of major items such as elevators for buildings. The availability of materials may greatly influence the schedule in projects with a fast track or very tight time schedule: sufficient time for obtaining the necessary materials must be allowed. In some case, more expensive suppliers or shippers may be employed to save time.
Materials management is also a problem at the organization level if central purchasing and inventory control is used for standard items. In this case, the various projects undertaken by the organization would present requests to the central purchasing group. In turn, this group would maintain inventories of standard items to reduce the delay in providing material or to obtain lower costs due to bulk purchasing. This organizational materials management problem is analogous to inventory control in any organization facing continuing demand for particular items.
Materials ordering problems lend themselves particularly well to computer based systems to insure the consistency and completeness of the purchasing process. In the manufacturing realm, the use of automated materials requirements planning systems is common. In these systems, the master production schedule, inventory records and product component lists are merged to determine what items must be ordered, when they should be ordered, and how much of each item should be ordered in each time period. The heart of these calculations is simple arithmetic: the projected demand for each material item in each period is subtracted from the available inventory. When the inventory becomes too low, a new order is recommended. For items that are non-standard or not kept in inventory, the calculation is even simpler since no inventory must be considered. With a materials requirement system, much of the detailed record keeping is automated and project managers are alerted to purchasing requirements.