Evaluation of Performance Measures for Materials
Management Process in Industrial Construction Projects
By
MOHAMMED KASHIF UL ASAD
A Thesis presented to the
DEANSHIP OF GRADUATE STUDIES
In Partial Fulfillment of the Requirements
for the degree
MASTER OF SCIENCE
IN
CONSTRUCTION ENGINEERING MANAGEMENT
KING FAHD UNIVERSITY
OF PETROLEUM & MINERALS
Dhahran, Saudi Arabia
December 2005
In the Name of Allah, Most Gracious, Most Merciful.
KING FAHD UNIVERSITY OF PETROLEUM & MINERALS
DHAHRAN 31261, SAUDI ARABIA
DEANSHIP OF GRADUATE STUDIES
This thesis, written by MOHAMMED KASHIF UL ASAD under the direction of his
Thesis Advisor and approved by his Thesis Committee, has been presented to and
accepted by the Dean of Graduate Studies, in partial fulfillment of the requirements for
the degree of MASTER OF SCIENCE.
Thesis Committee
____________________________________
Prof. Sadi Assaf (Advisor)
____________________________________
Dr. Soliman Almohawis (Member)
____________________________________
Dr. Mohammed Al-Khalil (Member)
_____________________________
Prof. Abdulaziz Bubshait
(Department Chairman)
_____________________________
Dr. Mohammed A. Al-Ohali
(Dean of Graduate Studies)
[Date]
To
My Beloved Parents and Sisters
for their
Innumerable prayers, encouragement and
patience.
”O Lord, bestow on them thy Mercy even as they cherished me in
childhood.” (The Holy Quran 17: 24)
ACKNOWLEDGMENT
All praise and thanks are due to Almighty Allah, Most Gracious; Most Merciful, for the
immense mercy which have resulted in accomplishing this research. May peace and
blessings be upon prophet Muhammad (PBUH), his family and his companions.
I would like to acknowledge KFUPM for the support extended towards my research
through its remarkable facilities and for providing me the opportunity to pursue graduate
studies.
All parents are a gift to their children. In that sense, my parents have always been there
for me in my good and difficult times. They have supported me in everything that I have
endeavored and their continual encouragement has lifted my confidence whenever I
encountered problems. Their wisdom and knowledge have made me into a better person.
Words fall short in conveying my gratitude towards them. A prayer is the simplest means
I can repay them - May Allah (S.W.T.) give them good health and give me ample
opportunity to be of service to them throughout my life.
I acknowledge with enormous gratitude the inspiration, encouragement, valuable time
and guidance showered by my thesis Committee Chairman, Prof. Sadi Assaf.
I am also greatly indebted to my thesis committee members Dr. Soliman Mohawis and
Dr. Mohammed Al Khalil for their valuable comments which have increased the value of
my research. I would also like to thank Dr. Abdulaziz Bubshait, the chairman of CEM
department for his support during the duration of the research.
Special thanks are due to my colleagues at the University, Munib, Khaleel, Jaweed,
Junaid, Shafi, Farooq, Rizwan, Mubashir, Imran and Mr. Jeelani who were always there
to help me in my work. I would also like to thank my friends Mazher, Baqtiar, Abdul
Qaiyum, Riyaz, Obaid, Siraj, Hameed, Anees, Ayub Azher, Jaffer, Mujeeb, Moied, Atif,
Yousuf, Aleem, Kaleem, Khaleel, Khaja, Awes, among many others who have been like
a second family to me here in KFUPM.
Table of Contents
LIST OF TABLES…………………………………………………………………...XI
THESIS ABSTRACT………………………………………………………………..XII
THESIS ABSTRACT (ARABIC)………………………………………………….XIII
CHAPTER 1 INTRODUCTION ........................................................................15
1.1
Materials Management .......................................................................................15
1.2
Research Objectives ............................................................................................17
1.3
Research Methodology ........................................................................................17
1.4
Scope and Limitations .........................................................................................18
CHAPTER
2
LITERATURE
REVIEW
Materials
Management
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2.1
Background
to
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2.2
Problems
in
Materials
Management
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2.3
Materials
Management
in
Construction
Industry
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2.3.1
Materials
Management
in
Industrial
construction
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2.3.2
Materials
Management
Organization
and
Personnel
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2.3.3
Improvement
in
Materials
Management
System
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2.3.4
Models
Developed
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in
Materials
Management
2.3.5
Cost
Effectiveness
through
Materials
Management
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2.3.6
Productivity
and
Materials
Management
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2.3.7
Computerized
Materials
Management
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2.3.8
Implementation
of
Materials
Management
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2.4
Techniques
in
Materials
Management
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2.4.1
Economic
Order
Quantity
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2.4.2
Materials
Requirement
Planning
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2.4.3 Just-In-Time .....................................................................................................39
2.5
Materials
Management
Process
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2.6
Materials
Management
Functions
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2.6.1
Project
Planning
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2.6.2
Materials
Take-off
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2.6.3
Vendor
Enquiry
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2.6.4
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Purchasing
2.6.5
Material
Control
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2.6.6
Warehousing
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2.6.7
Expediting
and
Shipping
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2.7
Material
Management
Performance
Attributes
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2.7.1
Accuracy
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2.7.2
Quality
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2.7.3
Quantity
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2.7.4
Timeliness
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2.7.5
Cost
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2.7.6
Availability
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CHAPTER
3
PERFORMANCE
MEASURES
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3.1
Background
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3.2
Measures
Adopted
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from
Plemmons
(1995)
3.2.1 Materials
receipt
problems
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3.2.2 Material
receipt
problems-internal
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3.2.3 Warehouse
inventory
accuracy
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3.2.4 Piping
spool
rework
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3.2.5 Jobsite
rejections
of
tagged
equipment
requisition
ratio
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3.2.6 Home
office
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3.2.7 Home
office
Purchase
Order
ratio
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3.2.8 Average
line
items
per
release
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3.2.9 Commitment-home
office
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3.2.10
Commitment-field
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3.2.11
Electronic
data
interchange
purchases
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3.2.12
Sole
source
purchases
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3.2.13
Minority
suppliers
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3.2.14
Procurement
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lead
time
3.2.15
Bid-Evaluate-Commit
lead
time
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3.2.16
Purchase
order
to
material
receipt
duration
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3.2.17
Material
receiving
processing
time
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3.2.18
Commodity
vendor
timeliness
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3.2.19
Commodity
timeliness
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3.2.20
Materials
withdrawal
request
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3.2.21
Materials
withdrawal
request
(MWR)
processing
time
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3.2.22
Average
manhour
per
material
take-off
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3.2.23
Average
manhour
per
purchase
order
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3.2.24
Freight
cost
percent
deliveries
percent
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3.2.25
Express
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3.2.26
Construction
time
lost
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3.2.27
Payment
discounts
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3.2.28
Electronic
funds
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transfer
payments
3.2.29
Release
value
breakdown
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3.2.30
Min/Max
release
activity
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3.2.31
Warehouse
safety
incident
rate
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3.2.32
Total
surplus
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3.2.33
Material
availability
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3.2.34
Stock
out
analysis
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3.2.35
Backorders
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CHAPTER
4
DATA
COLLECTION
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4.1
Background
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4.2
Research
Approach
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4.3
Content
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4.4
Interviews
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of
Questionnaire
CHAPTER
5
RESULTS
AND
DISCUSSIONS
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5.1
Overview
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5.2
Profiles
of
Materials
Management
Professionals
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5.3
Performance
Measures
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5.4
Past
and
Presently
used
Measures
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5.5
Importance
of
the
Performance
Measures
Performance
Measures
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5.6
Practicality
of
the
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CHAPTER
6
CONCLUSIONS
AND
RECOMMENDATIONS
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6.1
Introduction
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6.2
Conclusions
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6.3
Recommendations
for
Further
Studies
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6.4
Recommendations
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References
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for
Industry
Appendix-1
Questionnaire
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Vitae……………………………………………………………………………………123
LIST OF TABLES
Table 4.1
Position Titles of the Questionnaire Respondents………………….72
Table 5.1
Profile of the Respondents…………………………………………...81
Table 5.2
Respondents Areas of Expertise……………………………………..82
Table 5.3
Response to the Performance Measures…………………………….84
Table 5.4
Performance Measures for Saudi Arabia…………………………...86
Table 5.5
Importance of Proposed Performance Measures…………………..92
Table 5.6
Practicality of Proposed Performance Measures…………………..97
Table 5.7
Pearson’s Correlation Coefficient…………………………………..102
THESIS ABSTRACT
FULL NAME OF STUDENT
: MOHAMMED KASHIF UL ASAD
TITLE OF THE STUDY
:
EVALUATION
OF
PERFORMANCE
MEASURES FOR MATERIALS MANAGEMENT
PROCESS IN INDUSTRIAL CONSTRUCTION
PROJECTS
MAJOR
:
CONSTRUCTION
ENGINEERING
AND
MANAGEMENT
DATE OF DEGREE
:DECEMBER, 2005
The Kingdom of Saudi Arabia has experienced a massive construction boom since the
early seventies. Among other problems, Materials management has continued to cause a
major obstacle to the success and profitability of many construction projects. Studies
have indicated that materials constitute about 60% of the total project cost, and control
80% of the project schedule. Effective management of materials represents an area with
great potential for improving productivity of work and also controlling cost. Determining
the key effectiveness measures will benefit the construction industry. This research
revealed the Usability, Importance and Practicality of 35 Performance Measures for
Materials management process in industrial construction projects in Saudi Arabia. From
this study it was found that the Performance Measures that were found to be extremely
important were Material availability, Procurement lead-time, Construction time lost and
the Measures that were found to extremely practical were Material availability and
Construction time lost.
MASTER OF SCIENCE DEGREE
KING FAHD UNIVERSITY OF PETROLEUM AND MINERALS
Dhahran, Saudi Arabia
‫خالصــة الـرســالــة‬
‫االسم الكامل للطالب ‪ :‬محمد كاشـف األسـد‬
‫عنــوان الدراسـة ‪:‬‬
‫تقييم المقاييس الرئيسه إلدارة المواد في المشاريع الصناعية‬
‫التخـصـص ‪:‬‬
‫إدارة وهندسـة التشــييد‬
‫تاريخ الشهادة ‪:‬‬
‫ديســـمبر ‪2005‬‬
‫تشهد المملكة ومنذ السبعينات برنامج تشييد ضخم‪ ،‬والذي لم يخلو من الصعوبات ومن ضمنها إدارة‬
‫المواد‪ .‬ما تزال إدارة المواد تشكل عائقا ً رئيسيا ً لنجاح وربحية الكثير من المشاريع‪ ،‬ولقد بينت‬
‫الدراسات أن المواد تشكل ‪ 60%‬من التكاليف اإلجمالية للمشاريع وتتحكم في ‪ 80%‬من جدول‬
‫المشروع‪ .‬تمثل اإلدارة الفعالة للمواد أرضية خصبة لتحسين اإلنتاجية وتوفير الكاليف ‪ ،‬وبال شك‬
‫فإن قطاع صناعة التشييد سيستفيد من تحديد المقاييس الرئيسية لإلدارة الفعالة للمواد ‪ .‬يهدف هذا‬
‫البحث توضيح ‪ 35‬مقياسا رئيسيا متبعا في المشاريع الصناعية من خالل قياس أهميتها ومدى‬
‫عمليتها ومقدار استخدامها‪ .‬اتضح أن المقاييس الرئيسية ذات األهمية القصوى تتمركز حول ‪ :‬توفر‬
‫المواد ‪ ،‬الزمن الالزم لوصول المشتريات ‪ ،‬و الوقت الضائع في عمليات التشييد ‪ .‬كما أن المقاييس‬
‫الرئيسية األكثر عملية هي‪ :‬توفر المواد‪،‬‬
‫والوقت الضائع في عمليات التشييد‪.‬‬
‫درجة الماجسـتير في العلوم‬
‫جامعة الملك فهد للبترول والمعادن‬
‫الظهران ‪ ،‬المملكة العربية السعودية‬
CHAPTER 1
INTRODUCTION
1.1
Materials Management
Materials management is a process for planning, executing and controlling field and
office activities in construction. The goal of materials management is to insure that
construction materials are available at their point of use when needed. The materials
management system attempts to insure that the right quality and quantity of materials are
appropriately selected, purchased, delivered, and handled onsite in a timely manner and
at a reasonable cost. Materials management is the system for planning and controlling all
of the efforts necessary to ensure that the correct quality and quantity of materials and
equipment are properly specified in a timely manner, are obtained at a reasonable cost,
and, most importantly, are available at the point of use when required.(BRT 1982).
Materials management is an important element in project management. Materials
represent a major expense in construction, so minimizing procurement costs improves
opportunities for reducing the overall project costs. Poor materials management can result
in increased costs during construction. Efficient management of materials can result in
substantial savings in project costs. If materials are purchased too early, capital may be
held up and interest charges incurred on the excess inventory of materials. Materials may
deteriorate during storage or get stolen unless special care is taken. Delays and extra
expenses may be incurred if materials required for particular activities are unavailable.
Ensuring a timely flow of materials is an important concern of material management.
For effectively managing and controlling materials, the performance of materials
management should be measured. A performance measure calculates the effective
working of a function. These performance measures may differ from system to system.
The measures divide the materials management system in parts and make the working of
the system more efficient. When joined, the measures make the complete materials
management system. Research has been done in the past by Plemmons (1995) and AlDarweesh (1999) about the effectiveness measures in materials management. Plemmons
developed a list of effectiveness measures for industrial construction and proposed a
model for benchmarking the materials management process in industrial construction. AlDarweesh developed a list of measures from literature review and applied those measures
to 17 ongoing projects in Saudi Arabia to gain an understanding of the effectiveness of
these measures.
This study is about the performance measures affecting the materials management system
in industrial construction industry in Saudi Arabia. A list of performance measures
applicable in Saudi Arabia can be developed and their importance and practicality can be
studied to understand the working efficiency of the materials management system in
industrial construction in Saudi Arabia. This study looks at the effectiveness, the
performance measures of materials management have on industrial construction, from
contractors’ point of view.
1.2
Research Objectives
The objectives of this research are to:
1. Determine the performance measures used in the past and currently in use for
Materials management in industrial construction projects in the Eastern Province of
Saudi Arabia.
2. Determine the importance of the performance measures in assessing the effectiveness
of the materials management process.
3. Determine the practicality of implementation of performance measures in industrial
construction projects in Eastern Province of Saudi Arabia.
1.3
Research Methodology:
An extensive literature review was done to find the past and currently used performance
measures. The next step was to develop the questionnaire based on the literature review.
The third step was to conduct interviews with the contractors working in materials
management in SABIC and Saudi ARAMCO to determine the performance measures that
have been used or currently being used in Saudi Arabia. Also the importance and
practicality of these measures were calculated from the responses received through
interviews. Spearman rank correlation was done as part of the analysis to find the
correlation between the ranks under importance and practicality category. T-test was
conducted between the responses of Saudi ARAMCO and SABIC to find the difference
between their opinions in ranking the measures.
1.4 Scope and Limitations:
Industrial construction involves huge scope and hence large amount of materials
involvement, and complexities managing it. This is the reason that industrial construction
was preferred over other forms of construction for this research. Due to time and
accessibility constraints, the study was limited to the Eastern Province of Saudi Arabia.
Materials management is a field that has problems from owners’ as well as contractors’
point of view. This research is focused from contractors’ point of view, because it is the
contractor who is mainly responsible for the materials supply and management
throughout the duration of any project. The functions and measures for materials
management process are obtained by interviews with materials management personnel.
This study is to find the impact of performance measures of materials management in
industrial construction. The research was to evaluate the importance and practicality of
performance measures of materials management in industrial construction from
contractors’ point of view.