Study on Stock Management Practices in Construction Companies

Research Journal of Management

Vol. 2(4), 7-13, April (2013

International Science Congress Association

Study on Stock Management Practices in Construction Companies

Department of Civil Engineering, Kongu Engineering c

Received 5th

Abstract

The main objective of the study is to analyze the inventory

analysis is based on the primary and secondary data. The main source of primary data is by conducting questionnaire survey

and the source of secondary data is published Annual Report and stock s

secondary data of five consecutive years have been employed. Statistical tools like ABC analysis, FSN analysis are used. A

separate questionnaire survey is conducted for low level construction companies,

collected data is analyzed using Software. The secondary data is collected from medium and high level construction

companies. From the data analysis suggestions are given to improve the stock management practices follo

construction companies.

Keywords: Stock, inventory, primary data, secondary data, ABC analysis, FSN Analysis

Introduction

In industry inventory means ‘stock of goods’. Inventory is an

idle resource having an economic value awaiting

consumption or re-sale. Thus they are held primarily for some

transaction. ‘Today’s inventory is tomorrow’s production’. To

the finance manager, inventory connotes the value of raw

materials, consumables, spares, work-

goods and scrap in which a company’s funds have been

invested. He considers inventory as locked up capital. On the

opposite side are the user departments, which clamor for more.

To satisfy both sides, the inventory is to be controlled

manager exercises control over inventory. Inventory

management covers a large number of issues including

determining the size of the inventory to be carried; set

receipt and inspection procedure; determining the economic

order quantity; providing proper storage facilities; keeping check

on obsolescence and setting up effective information system

with regard to the inventories. Inventories should neither be

excessive nor inadequate. If inventories are kept at a high level,

higher storage costs would be incurred. A low level of

inventories may result in underutilization of capacity and lower

sales2.

Methodology

The following questions are designed for this

results are discussed below

For Low Level Companies: i. What kind of material stock will

you maintain in your company? ii. What kind of material stock

will you maintain in your company? iii. Based on which criteria

will you maintain stock for equipment spares?

maintain stock for cement how much percentage will you

retain? v. If you maintain stock for sand how much percentage

Management Sciences _________________________________

3)



Arunprakash N. and Nandhini N. Department of Civil Engineering, Kongu Engineering college, Perundurai,

Available online at: www.isca.in th March 2013, revised 17th March 2013, accepted 1st April 2013

dy is to analyze the inventory control practices adopted by the construction companies. This


and the source of secondary data is published Annual Report and stock sheets of the company. For the purpose of analysis of


separate questionnaire survey is conducted for low level construction companies, medium and high level companies. The


companies. From the data analysis suggestions are given to improve the stock management practices follo

Stock, inventory, primary data, secondary data, ABC analysis, FSN Analysis

In industry inventory means ‘stock of goods’. Inventory is an

idle resource having an economic value awaiting conversion,

sale. Thus they are held primarily for some

transaction. ‘Today’s inventory is tomorrow’s production’. To

e manager, inventory connotes the value of raw

-in-progress, finished

goods and scrap in which a company’s funds have been

invested. He considers inventory as locked up capital. On the

nts, which clamor for more.

To satisfy both sides, the inventory is to be controlled1. Finance

manager exercises control over inventory. Inventory

management covers a large number of issues including

determining the size of the inventory to be carried; setting up

receipt and inspection procedure; determining the economic

order quantity; providing proper storage facilities; keeping check

on obsolescence and setting up effective information system

with regard to the inventories. Inventories should neither be

excessive nor inadequate. If inventories are kept at a high level,

higher storage costs would be incurred. A low level of

inventories may result in underutilization of capacity and lower

The following questions are designed for this survey and the

What kind of material stock will

What kind of material stock

Based on which criteria

or equipment spares? iv. If you

maintain stock for cement how much percentage will you

If you maintain stock for sand how much percentage

will you retain? vi. If you maintain stock for coarse aggregate

how much percentage will you retain

for primer how much percentage will you retain

maintain stock for Steel rod how much percentage will you

retain? ix. If you maintain stock for coarse aggregate how much

percentage will you retain?

how much percentage will you retain

for equipment spares how much percentage of amount will you

spend? xii. Are you maintaining

keeping? xiii. When will you re

will make which of this following?

Fig

Schematic flowchart of the process routed in this work

_______________ ISSN 2319–1171

Res. J. Management Sci.

7


INDIA

2013

control practices adopted by the construction companies. This


heets of the company. For the purpose of analysis of


medium and high level companies. The


companies. From the data analysis suggestions are given to improve the stock management practices followed in

If you maintain stock for coarse aggregate

how much percentage will you retain? vii. If you maintain stock

for primer how much percentage will you retain? viii. If you

maintain stock for Steel rod how much percentage will you

If you maintain stock for coarse aggregate how much

x. If you maintain stock for bricks

how much percentage will you retain? xi. If you maintain stock

for equipment spares how much percentage of amount will you

Are you maintaining documentation for stock

When will you re-order? xiv. Maintaining stock

ll make which of this following?

Figure-1

Schematic flowchart of the process routed in this work

Research Journal of Management Sciences _______________________

Vol. 2(4), 7-13, April (2013)


For Medium And High Level Companies

that there is need for stock management system in the

organisation? ii. Whether you agree that

safety stock in your planning calculation?

importance will you give to stock management comparing to

other works? iv. How much percentage amount of project cost

will you invest in stock management? v. What according to you

is the major benefit of going for an inventory management

system in your company? vi. Does managing stock helps in

growth of company? vii. In what way managing stock helps in

growth of company and progress of the project?

of material access available for stock data?

of professionals are managing your company stock?

type of stock management system you are adopting?

the company is selecting the vendor? xii.

which your company uses to categorize the items?

type of cross check you follow for stock management?

will you control stock overflow in construction site?

Whether training is given for stock management practices?

What are all the data that your company is k

inventory? xvii. Where the stock is usually stored?

far is the distance from project site to storage yard?

Results and Discussion

For Low Level Companies: Inference from the above

figures: The above figures clearly says that

management is the only way to control project cost and stock

overflow. Maintaining receipts documents for the stock is the

only record to crosscheck the inventory. They also transfer the

stock and use the stock in other activity when there i

overflow. Most of the stocks are procured and used by the

company itself. ABC analysis is the best way to classify the

items. Almost every company keep the material access as

centralized.

Figure-2

Kind of material stock

41%

18%

12%

23%

6%Cement

Sand

Coarse aggregate

Steel rods

primer

Sciences ________________________________________________________


For Medium And High Level Companies: i. Do you agree

that there is need for stock management system in the

Whether you agree that you are including

safety stock in your planning calculation? iii. How much

importance will you give to stock management comparing to

How much percentage amount of project cost

What according to you

s the major benefit of going for an inventory management

Does managing stock helps in

In what way managing stock helps in

growth of company and progress of the project? viii. What type

available for stock data? ix. What categories

of professionals are managing your company stock? x. Which

type of stock management system you are adopting? xi. How

xii. Describe the method

gorize the items? xiii. What

type of cross check you follow for stock management? xiv. How

will you control stock overflow in construction site? xv.

Whether training is given for stock management practices? xvi.

What are all the data that your company is keeping related to

Where the stock is usually stored? xviii. How

far is the distance from project site to storage yard?

Inference from the above

above figures clearly says that they are stock

management is the only way to control project cost and stock

overflow. Maintaining receipts documents for the stock is the

only record to crosscheck the inventory. They also transfer the

stock and use the stock in other activity when there is stock

overflow. Most of the stocks are procured and used by the

company itself. ABC analysis is the best way to classify the

items. Almost every company keep the material access as

Kind of material stock

Figure

Criteria to maintain stock for equipment spares

Figure

Criteria to maintain stock for materials

Figure

Stock

Cement

Sand

Coarse aggregate

Steel rods

primer

11%

45%

11%

22%

60%10%

20%

10%

62%

13%

_______________________ ISSN 2319–1171


8

Figure-3

maintain stock for equipment spares

Figure-4

Criteria to maintain stock for materials

Figure-5

Stock for sand

11%

45%

Availability of fund

Equipment usage

Equipment condition

Job condition

Project cost

60%

Availability of

fund

Market condition

Site location

Climatic condition

Project cost

25%

Below 5%

5% - 15%

16% - 25%

26% - 35%

36% - 50%


Vol. 2(4), 7-13, April (2013)


Figure-6

Stock for Coarse aggregate

Figure-7

Stock for primer

Figure-8

Stock for cement

25%

75%

62%

25%

13%

62%

25%

13%

Sciences ________________________________________________________


aggregate

Figure

Stock for Brick

Figure

Stock for Steel rod

Figure

Stock for equipment spares

Below 5%

5% - 15%

16% - 25%

26% - 35%

36% - 50%

Below

5%

5% -

15%

16% -

25%

Below 5%

5% - 15%

16% - 25%

26% - 35%

36% - 50%

25%

37%

25%

13%

37%

50%

13%

75%

25%

_______________________ ISSN 2319–1171


9

Figure-9

Stock for Brick

Figure-10

Stock for Steel rod

Figure-11

Stock for equipment spares

25%

37%

Below

5%

5% -

15%

16% -

25%

37%

Below

5%

5% -

15%

16% -

25%

75%

Below 1%

1% - 5%

6% - 10%

11% - 15%

16% - 20%


Vol. 2(4), 7-13, April (2013)


Figure-12

Maintenance of document

Figure-13

Re-order

For Medium and High Level Companies

Figure-14

Need for stock management

100%

67%

22%

11%

100%

Agree

Disagree

Not always

Sciences ________________________________________________________


Maintenance of document

For Medium and High Level Companies

Need for stock management

Figure

Safety stock in your planning calculation

Figure

Stock management compared to other works

Figure

Benefit of going for an inventory management

yes No

Rate

fluctuatio

n

Site

demand

Agree

Disagree

Not always

100%

40%

20%

40%

50%

25%

25%

_______________________ ISSN 2319–1171


10

Figure-15

Safety stock in your planning calculation

Figure-16

Stock management compared to other works

Figure-17

Benefit of going for an inventory management

Agree

Disagree

40%

Very high

high

medium

low

very low

50%

It has made

storage and

retrieval of

material easier

Improved sales

effectiveness

Reduced

operational cost


Vol. 2(4), 7-13, April (2013)


Figure-18

Stock in growth of company

Figure-19

Type of material access

Figure-20

Categories of professionals managing stock

40%

20%

40%

60%

40%

Skilled and

trained

Only skilled

but not

trained

Sciences ________________________________________________________


Stock in growth of company

Type of material access

Categories of professionals managing stock

Figure

Type of stock management system

Figure

Vendor selection

Figure

Method to categorize the items

Centralized

Partly

Centralized

De-

centralized

Skilled and

trained

Only skilled

but not

trained

57%

40%

40%

20%

17%

33%

_______________________ ISSN 2319–1171


11

Figure-21

Type of stock management system

Figure-22

Vendor selection

Figure-23

Method to categorize the items

43%

Vendor/

Supplier

By our

company itself

40%

Price

Performance

Previous

experience

50%

ABC

Analysis

HML

method

FSN

Analysis


Vol. 2(4), 7-13, April (2013)


Figure-24

Type of cross check

Figure-25

Control of stock overflow

Figure-26

Distance from project site

60%

40%

30%

10%

10%

50%

Transfer to

other site

Block the

purchase order

Resend the

materials

80%

20%

Sciences ________________________________________________________


Type of cross check

Control of stock overflow

Distance from project site

Figure

Data kept related to

Table

ABC Analysis for Coconut Village

(Analysis is done for single house in that village and it is

based on the estimated data)Sl.

No Description

Amount

(Rs)

Coconut

Village 3447020

1 Cement 511000

2 Sand 489400

3 Steel 403260

4 Coarse

Aggregate 92400

5 Bricks 416000

6 Electrical

works 108865

7 Solid

blocks 186305

8 Plumbing 259800

9 Grill 98490

10 Wood

works 125000

11 Teak wood 35000

12 Painting 312600

13 Glass

works 33600

Inference from the analysis

analysis for a coconut village done for a private company. the

analsis is based on the consumption values. Classification foe

ABC Analysis is listed below

consumption value, ii. Class B type

value, iii. Class C type - Low consumption value From the

Analysis 5 A items, 6 B items & 5 C items. It has been

witnessed that the items belonging to category

much attention and the procurement of the same also causes

delay. Hence class C items needs special importance.

Online

offline

Transfer to

other site

Block the

purchase order

Resend the

materials

< 10 km

10 km –

25 km

11%

45%

44%

_______________________ ISSN 2319–1171


12

Figure-27

Data kept related to inventory

Table-1

ABC Analysis for Coconut Village

(Analysis is done for single house in that village and it is

based on the estimated data) Cumulative

(Rs)

Percentage

(%) Class

511000 14.82% A

1000400 29.02% A

1403660 40.72% A

1496060 43.4% A

1912060 55.47% A

2020925 58.63% B

2207230 64.03% B

2467030 71.57% B

2565520 74.43% B

2690520 78.05% B

2725520 79.07% B

3038120 88.14% C

3071720 89.11% C

Inference from the analysis: The above table shows the

analysis for a coconut village done for a private company. the

analsis is based on the consumption values. Classification foe

ABC Analysis is listed below i. Class A type – High

Class B type – Moderate Consumption

Low consumption value From the

Analysis 5 A items, 6 B items & 5 C items. It has been

he items belonging to category “C” are not paid

much attention and the procurement of the same also causes

e class C items needs special importance.

45%

Ordering date

Receipt

documents

Ordering Cost

Research Journal of Management Sciences ________________________________________________________ ISSN 2319–1171

Vol. 2(4), 7-13, April (2013) Res. J. Management Sci.

International Science Congress Association 13

Conclusion

After conducting the questionnaire survey it has been observed

that, almost 60% of the companies maintain stock for cement

based on the fund available. They consider that maintaining

below 5% cement stock will make them profit. Only 50% of

companies maintain stock for steel bars and most of them

maintain steel rod stock between 5%-10%. Companies also

maintain stock for sand but their rate is between 5% -15%.

Every companies are maintaining equipment spares and their

rate is below 1%. Only 37% of companies maintain stock for

bricks because more stock on brick will lock the capital. Every

organization include safety stock in the planning calculation and

40% of them give very high importance for stock management

comparing to others. Only 60% of companies use skilled and

trained professionals for stock management. Among the

companies following inventory control techniques ABC

Analysis is the most used control technique. The 50%

Companies use the stock overflow in other activities. Almost all

companies say that maintaining stock will fetch them profit and

they also do documentation work stock maintenance.

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