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Inventory Management in Construction Industry

Article in IOSR Journal of Engineering · May 2022

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IOSR Journal of Engineering (IOSRJEN) www.iosrjen.org
ISSN (e): 2250-3021, ISSN (p): 2278-8719
Vol. 12, Issue 5, May. 2022, || Series -II || PP 26-33

Inventory Management in Construction Industry

Harsh Malik1 and Pushpendra Kumar Sharma2*
1
PG Scholar, School of Civil Engineering, Lovely Professional University, Phagwara, Punjab, India
2
Professor, School of Civil Engineering, Lovely Professional University, Phagwara, Punjab, India
Main Author’s email: [email protected]
*Corresponding Author’s email: [email protected]
Received 08 May 2022; Accepted 23 May 2022

Abstract. Inventory management is a critical part of construction Industry. Inventory Management system
consist of different tasks like finding suitable materials, procurement process of those materials, transportation.
Materials on construction site cost around 50-60% of the total cost of the project, so it becomes very crucial to
handle the materials methodically. The main objective of this paper is to study the existing research on
inventory management in Indian construction industry to observe the importance of inventory management and
different costs associated with. Future scoop of this study will be how to conduct the projects smoothly and to
find the flaw in the inventory management on construction site or the factors affecting the poor management of
materials on site and also to find the research gap so that more reliable findings could be achieved. This article
will contribute a lot to the research, society, new researchers and constructions.
Key words: Inventory, Construction, Materials, Projects, Management etc.

I. INTRODUCTION
Inventory management plays an important role in the completion of construction project successfully
and on time. The role of inventory is to store the materials on site so that those material can be available in time
of their use. Inventory not only holds the material required for construction but also store the finished products,
spare parts and tools. It is very common in Indian construction industry that the project suffers from cost
overrun and exceeding the deadline. The problems like this could be solved by the proper implementation of the
inventory management. Which will increase the productivity on site and the progress of project will be
consistent. Inventory management consist of many processes like selecting the materials and their procurement,
cost involve in transporting them and storage of materials. Inventory management has its own budget which is
used in different costs in maintaining and running the inventory at optimal level, those costs are-
Ordering cost; The essential cost incurred when a company placed an order.
Holding cost; The cost associated with the storing of materials before it is used on site.
Storage cost; The cost associated with storage of material. This cost could be direct or indirect which includes
the cost of rent, electricity and etc.
If the project needs to be conducted smoothly then all factors need to be accomplished by good communication,
making critical decision and keep an eye on inventory and manage it properly.

II. LITERATURE REVIEW

Singh and Singh (2013) studied the just in time (JIT) strategy. The authors also mentioned the
elementary method of inventory control i.e., ABC analysis. Authors explained the philosophy behind the JIT
strategy and mentioned that no activity should take place until the requirement of that activity. JIT also helps to
eliminate the excess inventory by which the waste in inventory automatically reduces. It could be done by
simplification of manufacturing process. Since quality become the necessity, with this there will be fewer
defective items in the inventory. Which reduces work in process inventory. The authors concluded that JIT has
potential and it could take the organization through this competitive market as well as from this dynamic
environment of construction industry.
Mansour N. Jadid (2013) studied and developed a framework using an internet-based system which is
in the material selection decision support system for projects that are under design or construction phase. This
development could help various domains of civil engineering but the authors focused it architecture,
engineering, construction and inventory management department. The authors focused on the problems like
material approval, selection and information management. The authors mentioned that the main source for the
input of data is from the previous or current projects. This paper discussed various criteria for material selection
like maintainability, aesthetics, adaptability, durability, sustainability, cost efficiency and lack of toxicity which
all support the officials to finalize decision on material selection.

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 Inventory Management in Construction Industry
Patil and Pataskar (2013) analysed the inventory management techniques. Authors focused on to find
the present techniques in inventory management. This study was done in two phases, in first phase, the authors
used the S curve analysis by using MSP tools to provide qualitative data and for second phase, the authors
considered the ABC analysis and EOQ analysis to solve the problem of stock out. The authors collected data
from tender documents, material requisition note, ledger register and interviews. The result says the
unavailability of RCC drawing causes the problem to contractor to assess the project accurately. Uneven
geographical feature could also impose delay or problem on projects. The authors recommended ABC and EOQ
analysis should be done before the work starts and all the drawings should be completed or handed over to
contractor to increase the efficiency of inventory management.
Jose V and Jayakumar (2013) studied different items from inventory and done the EOQ analysis and
ABC analysis to find out which materials are important to project and their respective quantities. The authors
collected the data of 40 materials from inventory and gathered the following data of each material like demand
per year, re order cost, carrying cost and number of units ordered. Then the authors mentioned about safety
stocks and how we can apply it in inventory management. Authors calculated the actual demand for a period of
1 year and lead time is taken 100 days maximum. The authors also segregated all 40 items into class A, B and C
to do the ABC analysis. The authors found that the items with worth more than 100 rupees are consisted of 45%
of total inventory, items with worth 25- 100 rupees are in 35% of total inventory and items with less than 25
rupees are only of 30%.
Arunprakash and Nandhini (2013) studied about the material control exercises adopted by different
construction companies. For this, the authors designed the appropriate questionnaire and identified the
companies. There was also a secondary mode of data collection where the authors go through the company’s
stock books. In this paper, the authors made some criteria and analysed it. Different criteria is kind of material
stock, maintain stock for equipment spares, maintain stock for materials, stock for sand, brick, aggregate, steel
rod, primer, cement, maintaining documents, reorder of stocks and stock management. The authors found that
50%-60% companies only focused on important materials like cement and steel. Rest of the materials and their
availability on site decreased as they were less important for the companies and required lot of space to hold
those materials.

Depending Factor Quantity of materials

70% (Out of 100 materials)
60% 50
50% 40
30
40%
20
30% 10
20% 0
10%
0%
Availability Market Site Climatic
of fund Condition location Condition
Fig 1: Depending factors for maintaining the Inventory Fig 2: Different Materials in Inventory
Source: Arunprakash and Nandhini (2013) [5] Source: Arunprakash and Nandhini
(2013) [5]

P. Lenin et al (2014) studied about the illegitimate inventory management and how it affects the cost of
the construction project. For this the authors used the questionnaire and interview to collect the information and
examined the practices of inventory management by the contracting companies. 26 factors were found to be
most critical in this paper. This paper also aimed to rank the factors in accordance with their significance. The
authors condensed the factors related to, design, client, contractor, site, labour and equipment, store, external,
market condition and overall material mismanagement. The authors also ranked the factors with design related
factors at top and client related factors given lower rank.

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 Inventory Management in Construction Industry

Mean
Design(4.1)
5

Market(3.5) 4 Client(3.1)
3
2
1
External(3.45) 0 Contractor(3.4)

Store(3.5) Site(3.25)

Labor(3.35)
Fig 3: Factors effecting the Inventory Management
Source: P Lenin et al (2014) [6]

Samuel and Ondiek (2014) studied the inventory management automation and the performance of
supermarkets with consideration of some automated systems like Material Requirement Planning (MRP),
Electronic Point of sale (E-POS), Enterprise Resource Planning (ERP), Vendor Managed Inventory (VMI), E-
procurement and Radio frequency identification (RFID). For this, the authors used descriptive survey design and
collected data from 12 supermarkets. The authors recommended that decentralized management structure is
more effective to make decision as it provide the low-level manager to make a decision. Supermarkets should
take initiative to collect the information to know how to precisely determine the demand of the customers.
Pande and Sabihuddin (2015) studied about the implementation of the inventory management
techniques and how it will affect the management of the items on construction site. The authors adopted
quantitative and qualitative methodologies. For the qualitative analysis, the authors used the MSP (Microsoft
project) software to study the actual cost and planned cost of the items in the inventory. For quantitative
analysis, the authors used the ABC analysis and EOQ analysis. The authors also mentioned about the how often
have different materials been ordered on site. The authors found that by using the EOQ analysis, he managed to
solve the issue to stock out of cement bags. He showed the result of S-curve Analysis and identified the problem
of variations in planned cost and actual cost of the material like problem with availability of RCC drawings and
procurement of materials.

Order Frequency
Cement (15)
30
25
20
15
Aggregate (18) 10 Steel (21)
5
0

Sand (8) Brick (27)

Fig 4: Frequency of Orders

Source: Pande and Sabihuddin (2015) [8]

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 Inventory Management in Construction Industry
Rohit S. Agawane et al (2015) studied about the effective ways to manage the procurement and with
this, to optimise the quality, cost and duration for the project. The authors also researched about the different
modern techniques which can be used in project management like Microsoft Project, Primavera and Enterprise
Resource Planning. For this the authors collected the data from questionnaire from a purchase manager in Pune.
The authors found that factors affecting the procurement management process like the effect of location,
availability of equipment, availability of raw material etc. He also mentioned the data required for procurement
management i.e., Planning, estimation, Records of spend, Lead time analysis and ABC analysis. The authors
also ranked the modern methods of procurement management.
Patil and Patil (2015) researched about the accomplishment of the Just in Time inventory control
technique on highway construction. The authors did the case study of a company doing a highway construction
in Solapur district of Maharashtra. In this paper, the authors calculated equipment’s productivity and monthly
consumption of each material and suggested the JIT method for the construction of highway. The authors
mentioned problem related to the project. Authors found that JIT method could save 5% cost of highway
construction. Different equipment used could be less if JIT method was used.
Matsebatlela et al (2015) developed the framework for inventory management. The authors focused his
study on raw materials and components to develop the framework for inventory management where he
specifically focused on the reasons for excessive inventory. He collected the data from Enterprise Resources
Planning system (ERP). Afterward, he has done the quantitative analysis. The authors concluded his study as the
factors that affect the inventory are lack of collaboration between supply chain, lack of replenishment of
inventory in a proper way and lack of guidelines in inventory management system of an organization. After he
suggested the replenishment strategies for MTO-MTS system better now as push pull strategy. He also
mentioned to analyse and use the Radio frequency identification of materials to increase the efficiency of
inventory management framework.
Hansan et al (2015) studied the inefficient measures taken by the officers of inventory and the
shopkeeper, the authors also mentioned the factors like inexperience and how absent workers impact the
productivity. The authors used the purposive sampling to select the samples, Simple random sampling is used to
reduce the biasedness of purposive sampling. This paper is based on the practices used in the inventory
management of an organization. Thereafter, authors have mentioned different inventory classification models
like ABC analysis and Critical value analysis. The factors involved in poor inventory management by the
authors are- large quantities of obsolete items, high customer turnover rate, increasing number of back orders,
examination of returned goods procedures, lead time analysis and etc. Authors also mentioned the advantages
and disadvantages of Just in Time Inventory management (JIT). The authors found the 3 points which could
ensure the inventory lean and clean.
Shet and Narwade (2016) studied the inventory management of industrial building by using different
techniques. The main objectives of authors in this study are to find the effective item cost from the total cost, to
determine the causes of lacune in inventory management, to list out the various techniques in Indian
construction industry. For this the authors have to go through various stages to collect the data for the study like
literature reviews and in it different techniques like ABC analysis and S curve analysis are used. The authors
pointed out some factors as a result. First of all, the authors focused on ordering of materials should be done by
consider the following points like quantity of items required and their scheduling activities, transportation
capacity and time needed to reach the site and etc. After that, the authors mentioned the handling of Class A, B
and C materials should be taken into account during the whole project.
Tundura and Wanyoike (2016) researched about the effect of inventory management strategies. The
authors focused on three strategies of inventory control; Computerized inventory accuracy, cycle counting and
inventory coding. The objective of this paper to find the effect of computerized inventory management on
inventory record accuracy, to find the effect of cycle counting on inventory management. There after the authors
mentioned the effects of cycle counting, inventory coding and computerized inventory on inventory record
accuracy by using literature reviews. The authors used the Pearson correlation to establish the relation between
the three strategies and as a result, authors recommend that cycle counting is a good determinant in accuracy.
The authors also mentioned which organization or what type of work could use these three strategies.
Deepak and Kumar (2016) studied the material stored in the inventory of project and the amount in
which they are stored, He also studied whether the material on site is in excessive amount which will increase
the holding cost. He mentioned that there are 2 types of inventory decisions-1The item in inventory is empty and
have to fill it again, 2To filling the item again, how much of that item need to be ordered. He studied the
residential project’s drawing and examine the situation on site and he did the quantity calculation by using
Microsoft Project software. He found that quantities can be calculated from the drawing and the inventory chart
preparation can be done effectively by considering the factors like site conditions and interlocking activities,
with all this the holding cost of the inventory can be controlled and the over dumping of material cannot happen
on site.

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 Inventory Management in Construction Industry
Vikram Kulkarni et al (2017) studied the factors of inventory management that affects the construction
site. Authors focused on to study the various procedures of inventory management and to provide the remedial
measures to reduce or eliminate factors affecting the inventory management on construction site. Later in this
paper, authors explained the benefits of this study in 13 points and provided a theoretical framework. The
authors divided the factors affecting the inventory management in three firms, large, medium and small firms.
The result of this study was that large firms followed the protocols and use software to manage the inventory
whereas medium and small firms do not use these techniques, they are depended on conventional techniques of
inventory management. The authors suggested to use the software like MSP, ERP, and etc.
T. Subramani et al (2017) studied about the adoption of the inventory management control and the
productive use of inventory in construction projects. He used structured and purposive methods like framing
questionnaires, review collection of literature in inventory management and use ABC analysis. The authors
discussed about the techniques of Inventory Control like; Setting up various stock levels, maintaining perpetual
inventory System, Reordering level, Maximum level. The authors found that contractor should involve itself in
inventory management and also maintain the stock list and material usage and the storage of material safely,
contractor need to check these things in order to improve the inventory management. So the Inventory
management system is known to be very important for an organization, for company’s project to finish on time.
Patel and Patel (2017) have done a case study, where he paid attention to the ways in which the
materials were managed and how the project used the techniques like ABC classification and EOQ analysis to
balance the materials in inventory. After that the authors discussed the type of objective of material
management, primary objective which consist of low price, maintaining consistency of quality, maintaining
flow of output etc. Then there was secondary objective like committees to decide what to buy, development of
inter department relations etc. The authors used ABC analysis, specifically he computed the annual usage value
of each item. Authors analysed 57 different materials from the inventory. Authors observed from his study that
EOQ technique can help to reduce the wastage of materials on construction site. The result from S-curve
analysis shows that the contractor can find the causes for the deviation in actual materials cost and planned
material cost. The authors also emphasized on the importance of handling the materials from the design stage to
construction stage.
Kameshwar and Saravanan (2017) studied about the effective system of inventory management present
in the construction industry. The objective of this paper is reducing the total cost of inventory and achieve the
optimum quantities of items for the construction at right time. The authors analgised 41 different materials from
different work in construction, for example safety helmets, PVC cover block, measure tape, Shovel, mortar and
etc. The authors suggested that inventory management team should replenish multi-item jointly to reduce the
ordering cost. The authors also suggested 7 points explaining different techniques that can be used and what
materials are important, are in continuous use throughout the project.
V. Rathinakumar et al (2018) studied material planning and inventory control, the role that material
management plays in the efficient management of the project. He studied the case study of residential apartment
of stilt+4 building and interviewing engineers and contractors. The authors analyse the cost performance of
cement, steel and bricks through S curve analysis which resulted in all the 3 materials have the cost performance
index value less than 1. The paper mentioned the cause for the variance of cost that are; changes have been
made in material condition during transportation, Anticipation of market was poorly executed, Materials got
damaged during storage, The material was utilize ineffectively. In this research Sensitivity analysis is also done
to find how the change in value of demand and holding cost effect the EOQ’s output value. He found that the
sensitivity is 0.3 for 10 percent change in demand and for 25 percent change in holding cost of inventory, the
sensitivity was 0.42. Furthermore, the authors found that the actual cost of the material is higher than the
planned material cost which implies that the project is running under overrun of cost. The research indicated that
the efficiency of project could increase by 35 percent if proper implementation of inventory management is
there in project.
Nazar Sohail (2018) studied the connection between the company’s performance and the material
management. He studied the case study of small industry who is manufacturing steel. He found that
performance of the company based on inventory days and return on Asset analysis. The author gathered data
through different interface and through structured and unstructured interviews. He considered the annual reports
and magazines articles. He found that the company should order their material regularly instead of ordering in
bulk, he also suggested that despite managing inventory well, company should also use the modern technology
to get the better hold onto its inventory.
Praveen and Suresh (2019) studied the different material management methods on construction project.
The authors collected data from a construction project in Devanahali in Bengaluru and analysed 78 different
items in inventory with methods like ABC analysis, VED analysis, HML analysis and EOQ model analysis.
They authors found the categories of all 78 items in ABC analysis, further more they combined it with VED and
HML analysis to understand and to get the accuracy during the procurement of the items. The Author also found
the Planned cost of each floor of the building and compared it with the actual cost for each floor. With EOQ
International organization of Scientific Research 30 | Page
 Inventory Management in Construction Industry
model analysis, the authors showed and suggested the optimal quantities of different items required in the
inventory.

Cost for each floor

200000
195000
190000
185000
180000
175000
170000
Ground 1st Floor 2nd Floor 3rd Floor 4th Floor 5th Floor 6th Floor 7th Floor 8th Floor
Floor

Planned Cost Actual Cost

Fig 5: Planned and Actual cost of each floor

Source: Praveen and Suresh (2019) [22]

Rashmi Ranjan Panigrahi et al (2019) studied to pick out how different organization use the inventory
management techniques to operate their inventory at optimal level. Authors’ objective of this study was to find
the various advanced inventory management accepted by the manufacturer of steel and to find the link between
the efficiency of manufacturing industry and advanced inventory management. For this, the authors collected
data from questionnaire that was send to officials of manufacturing industry. Authors found from the study that
recently services, cost quality, flexibility in performance and innovation have a huge impact to make good
inventory management. The factors like reduction of wastage, improvement in production, minimizing
manufacturing downtime, reduce number of scraps and rejects can be solved by the techniques in advanced
inventory management. The researchers suggested that if the advanced techniques are used then output
performance of the industry will increase.
Gaviyaa and Kumar (2020) studied and showed the disadvantages of single criterion classifier (low
price vendors) and gives optimal multi criterion model to analyse the inventory material which gives cost
advantageous material management system. The authors used two methods; Single Criteria Model (SCM)
results using single factor like cost or ageing. And the second one; Multi criteria model (MCM) which gives
result by considering multiple factors like; ageing, cost, lead time, annual expenditure in rupees. Authors studied
about 100 real project inventories, the authors collected data from it and analysed in SCM and MCM. He found
that only 8 items out of 100 are found to be under same category (A, B or C categories) which shows that each
factor has different priorities for the same item. The single criterion model needs the inventory items to be
homogenous to get the most out of it but in multi criterion model we can use different types of inventory items.
Udaya and Philominal (2020) studied the going practices for material management in construction
project and inventory control techniques like ABC classification, EOQ analysis and SPSS software. Authors
analysed data collected from residential project and some literature review as well. And found that the
supervision was inefficient, poor communication between the team which overall lead to improper and frequent
moving of material on construction site. All these lead to cost increased not only in project but also in holding or
storing of the inventory materials that all finally delays the completion of the project.

International organization of Scientific Research 31 | Page

 Inventory Management in Construction Industry

Percentage of Annual Usage

Windows Gravels
8% 7% Doors
Wiring
Tiles 4%Lime
1%
16% 4% Water tank
Steel
4% Stone 1%
2%
Other Ceiling fan
9% 1%

Bricks
19%
Aggregate
4%
Cement
29%

Cement Bricks Tiles Windows Gravels Doors Lime

Steel Aggregate Stone Wiring Water tank Ceiling fan

Fig 6: Percentage of Annual usage of materials

Source: Udaya and Philominal (2020) [25]

III. CONCLUSION
From this theoretical study, different problems with inventory management have been found. The
factors that affect the inventory on construction site have also been found. Considering these factors, many
techniques are recognized like use of SPSS software to test and find the reliability factor, EOQ analysis to find
the optimal quantity of materials that need to be stored in inventory, ABC analysis to categorize the different
materials on site according to their importance, VED analysis is one more step to ABC analysis in which it
categorized the A, B, and C materials into Vital, Essential and Desirable categories. This paper also provides the
information of where we can implement the automated technology like Material Requirement Planning (MRP),
Electronic Point of sale (E-POS), Enterprise Resource Planning (ERP), Vendor Managed Inventory (VMI), E-
procurement and Radio frequency identification (RFID). This paper contributes to questionnaire formation for
site engineers or construction engineers. Also contributes different ways of finding data. Most of the authors
collected data from interview and questionnaire. So, there is an urgent need to find on field situation of the
inventory management and different factors associated throughout the project to make it a grand succuss.

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Harsh Malik, et. al. "Inventory Management in Construction Industry." IOSR Journal of
Engineering (IOSRJEN), 12(05), 2022, pp. 26-33.

International organization of Scientific Research 33 | Page

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