Capital Project Material Management
Capital project material management is one of the most underutilized and underappreciated strategic value drivers in the construction industry today. During lean times, material management can provide budget support in a number of ways. Considering that a typical project BOM may account for the 70% of the overall project expense, material management can not only help companies obtain materials at the lowest possible cost but also maximize the construction material work effort from cradle to grave.
Capital project material management brings together the functions of purchasing, expediting, project management, quality, and engineering. Typically, EPC projects have sis phases: planning, design, procurement, vendor control, construction and closeout and a well-planned approach to material management can be a key difference maker in terms of profitability and avoiding delays and resulting penalties caused by misplaced or lost material. if done well, a materials-management framework can be the most effective project management tool to support all project objectives. There are some recurring themes that we see in the field. However with some pre-planning and support can easily be mitigated.
Just like in every other role it is paramount to have the people with the right skills and training necessary to effectively operate within a complex and dynamic material ecosystem. The material management team needs to be well versed in traditional in supply chain functions, principles of material management as well as have the available bandwidth to focus on material management as a key function that is deserving of its task and purpose. Often, companies may rely on whoever is available or double task a member of the project team who is already juggling multiple responsibilities and competing priorities. This induces unneeded supply risk and the potential for incurring excess costs and potentially construction delays.
A project is particularly vulnerable to material related issues when the material management team lacks the requisite knowledge to inspect material immediately upon arrival to identify and communicate deficiencies to the project team. Early warning of supply issues and proactive communication can allow the project team to move in a non-linear fashion avoid a delay. Failure to sound the alarm early enough could result in delays, improper material allocation or even loss of material.
In addition to tracking and receipt of material and staging of material in order to maximize the constructability is not being implemented across the board as an industry best practice. It is also imperative that to maximize construction alignment, construction has visibility into the availability of material. However, often this is not the case and it is not until the material is requested that a project manager finds out that the lead time is two weeks longer than expected.
Professional inventory management encompasses a broad scope of responsibilities including quality management and the need to understand the functional requirements of the material being handled In cases where ad hoc material handlers do not fully understand the functional requirements of the parts being handled may result in QA/QC caused delays due discrepancies or damage. Real-time QA/QC at the point of receipt would help to mitigate these issues after the material has been issued and is ready to be installed.
The current practice used to fill BOMs is simply to distribute material across the project without much consideration for the quantities required at each location. This often results in having too little material at one location and too much at another. This limited communication between the various projects allows excess material to be utilized elsewhere to avoid overage ordering or excessive costs due to minimal ordering requirements. This excess material is then either returned and scrapped or not returned. Regrettably, this unused material is still charged off to the project whether it gets used or not.
