Inventories of materials are definitely needed by all construction agencies -big or small. But inventories tend to become big without proper control. For any organisation, there is always a need to maintain some safety or buffer stock in order to maintain the smooth flow of materials without impairing production. But, as more and more stocks of materials are held, this not only entails greater investment, but carrying and other associated costs also increase considerably. On the other hand, if minimum inventory is held, with the increase in frequency of buying, the cost of ordering and processing increases. Also the cost of stock-out poses economic problem. Thus, the inventory control is a major materials management function which requires the reduction in materials costs without impairing operational efficiency and, therefore, needs a careful attention.
The analytical approach to inventory control is fundamentally based on cost-study. It is, in fact, balancing of some opposite costs which is well enunciated in EOQ formulation, but further refinements are also necessary as the situation dictates. Sometimes, there are several costs associated with inventory, but there is always one in one direction. As mentioned earlier, the resolution of the problem generally requires two basic questions to be answered : (a) how often to order, and (h) how much and when. Determining these two
basic question-answers precisely requires cost-information and the solution lies in balancing opposite costs in order to find an optimal solution. These aspects have been covered in latter sections of this unit.
Need of Inventory Control in Construction
As shown in Table , out of the total cost of a construction project, above 75% cost is associated with the cost of materials used. Therefore, an effective control over the materials cost is required for reducing the overall cost of construction. And in fact, the cost of materials can be controlled by controlling the inventory of the tools, equipment and materials.
Periodical inventory of the tools, equipment and materials should be taken up in every site to know the exact position and condition of the materials, tools and plant. Its main advantages are as follows :
- any excess material not presently required can be shifted to other site for use,
- before writing any requisition previous balance quantity may be accounted for and order may be placed for what is needed,
- any shortfall or damages the material can be brought to notice of the higher authorities,
- repairs or modifications to storing system can be done if required,
- cross-checking of the records maintained by the store-keeper can be done,
- consideration of percentage of wastage for various materials can be studied and standardised to avoid excess inventory; and
- purchasing of material in stages as per work programme can be followed to avoid additional financial burden due to excess inventory.
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