The most significant portion of a building project’s costs typically comes from the materials. Have you ever placed an order for too many goods or tools? Or putting an order too late, resulting in delayed delivery dates? If so, you need to be aware that poor handling of materials can cause projects to run late and over budget, resulting in significant financial costs for your company.
One of the most significant problems the construction industry is currently facing is a material shortage. Many are experiencing difficulties obtaining the required materials, such as cement and plywood. Several factors influence material availability. For example, low water levels make it difficult for ships to transport goods, and rising fuel prices and a shortage of drivers make it challenging for trucks to move goods over land.
So the big question is, how can general contractors deliver projects successfully when facing numerous issues with the supply chain and gaps in material availability? The simple answer is to minimize these gaps as much as possible. Contractors can maximize the use of materials by utilizing an efficient inventory management system.
Inventory management is more than just moving and assigning the materials around. It is easier to keep each project on track by ensuring that the necessary resources are available at the right time and in the right quantities. As a result, it is essential to utilize effective methods for managing the supply chain and to plan how subcontractors will utilize materials. In this article, we will discuss how to efficiently manage your supplies throughout the entire construction process, from estimating to change orders and final delivery.
How to Manage Materials in the Construction Industry
As mentioned earlier, construction projects cannot be completed without materials. But having the materials sitting in your warehouse is not enough. Because they are used so often, they need to be brought on time, stored correctly, and managed efficiently for a general contractor.
Multiple teams work on procurement because it is a complicated process that begins with estimating the quantity of items needed and concludes with delivery. Here are some of the processes involved with inventory management.
Bidding
It all starts with putting out a request for quotes while the project is being planned. You will need to speak with multiple sellers before placing a single order. It is not just about getting the best deal, but also about finding out if each material is available and when it can be delivered. This needs an easy way to keep track of replies and organize communication with vendors.
Estimating and Forecasting
Estimating materials is crucial for planning and executing a building project, as they have a direct impact on the budget, schedule, and delivery timeline for the materials. You will have a more accurate quote by getting as much information as possible from the vendors.
Procurement
The next step is to make the buy orders once the vendors have been chosen. This is where the documents with planned quantities, unit prices, and supply times are made and sent to suppliers. A well-written purchase order includes a detailed description of each item. There should be a summary, a measurement, several items, agreed-upon prices, and, most importantly, a delivery date.
Scheduling
Scheduling packages to arrive at the job site without overcrowding is referred to as delivery logistics. It may be challenging to find a secure place to store items. This is why it is crucial to send buy orders on time and maintain open communication with vendors. Most of the time, the materials should reach the point of use as close as possible to the point of use. Ensuring teams utilize the right resources at the right time with minimal waste.
Storage
Keeping things safe from theft, damage, and the weather is what storage is all about. On large building projects, it is common to have a designated storage area. A separate team can be responsible for deliveries and monitoring resource levels.
Waste Management
As the general contractor, you are also responsible for managing construction waste. This includes disposing of garbage properly and adhering to all applicable rules and regulations. To ensure your crew’s safety, the construction site should be safe, clean, and well-managed.
Change Orders
Construction projects are susceptible to changes that are not always attributed to problems. A client may request a change to the plan, or previously out-of-stock materials may become available. It is crucial to monitor and manage change orders efficiently so that they do not hinder work or exceed planned costs.
Who Takes Part in Inventory Management?
Managing inventory is easier said than done. To plan and purchase materials effectively, you need a coordinated team.
Project Managers
The project manager makes sure that everyone in the system is on the same page. This includes ensuring that the right materials are purchased at the right time for each stage of the project and that effective communication with field teams keeps the project on track.
Procurement Managers
Sometimes referred to as materials managers, procurement managers are responsible for placing orders, negotiating prices, monitoring contracts with suppliers, and ensuring that items are delivered on schedule and by the terms of the contract.
Warehouse Managers
Warehouse managers are responsible for handling deliveries and maintaining stock levels. They maintain accurate records for every item received or shipped out of the warehouse. They also oversee the physical storage of items to ensure they are kept in good condition.
Site Engineers and Supervisors
Every day, field teams use materials and report when there is not enough. In a large company, these could be site engineers and supervisors who oversee the installation and placement of materials.
Cost Managers
Cost managers, also known as project accountants, perform all calculations and are responsible for the financial aspects of purchasing materials and supplies. They will tell the team if the price of the inventory is within or over the budget.
Common Mistakes to Avoid in Inventory Management
It is not always easy to keep track of inventories, and even the most experienced contractors can run into complications. In this section, we have listed a few things to watch out for.
Timing of Procurement
Timing is a crucial part of the entire building process. Materials can get damaged or even lost if they arrive earlier than expected. On the other hand, placing an order too late can disrupt the entire project schedule.
Therefore, it is crucial to collaborate with suppliers you can trust to ensure your orders arrive on time. It is also essential to plan when to purchase items so that they align with the project’s schedule.
Inaccurate Estimates
Estimating the amount of resources is crucial for effective inventory management. Additionally, the costs of building supplies, such as frame lumber, fluctuate significantly, which may impact the total project cost. A single mathematical error, a missed line item, or a misspelling might ruin the whole purchase order.
Lack Of Communication
For inventory management to proceed smoothly, there must be constant communication between the general contractor and the supplier. Nowadays, many software tools have platforms for vendors and subcontractors. All of your documents, quotes, and progress updates are in one place, keeping everyone updated.
Tips on How to Efficiently Manage Inventory Despite Material Shortages
Even with the challenges that come with material shortages, there are a few simple steps that you can take to minimize their impact on your projects.
Diversify your Suppliers
When you diversify your supply chain, you have multiple backup options in case a single supplier is unable to deliver the required materials. This prevents the possibility of supplier failure, which often results from relying on a single supplier for all your building materials. Having a pool of several trustworthy suppliers can provide you with a steadier and more dependable flow of goods while allowing for adjustments to shifting market conditions and sudden problems.
Enhance Communication
Your team needs to be able to plan and communicate effectively with each other so that resources are utilized in the most efficient manner possible when resources are limited. Building strong relationships and fostering open communication are key ways to stay ahead of supply shortages and industry changes. This real-time information enables you to plan for difficulties you know will happen, adjust deadlines, and explore alternative options or providers if needed.
Prepare Materials Alternatives
You can opt to use alternative materials that are more readily available instead of the ones that are required. This goes along with having a variety of sources; the more choices you have, the easier it is to handle a shortage of building materials.
Set Priorities
Setting priorities for essential projects is an efficient way to manage material shortages. By determining the importance and urgency of various jobs across your portfolio, it becomes easier to allocate scarce materials to the most critical ones and maintain smooth operations when materials are in short supply.
Buy Goods in Bulk
Many materials, such as lumber, concrete, and drywall, are required for every construction project. Ordering these things ahead of time will help you avoid running out of them. Consider negotiating deals with suppliers to purchase goods in bulk, which allows for larger quantities at lower prices.
Adapt Construction Technology
In today’s competitive world, construction project managers need to work smarter, not harder, if they plan for shortages of building materials. When you use construction technology to improve the building process and cut down on waste, you can keep the materials you already have in case you run out.
Manage Risks
You can manage risks by using contracts with provisions that address the facts of material volatility. Include clear rules regarding how to handle significant price changes, along with objective tracking systems based on standard cost indicators within the industry. You can also include clear language about potential material delays that could impact project schedules, as well as specific steps for adjusting timelines when shortages occur despite reasonable efforts to mitigate them.
Reduce Wastes
Due to the material shortage, it is critical to ensure that every material is utilized correctly. You can invest in processing equipment that can be implemented immediately to transform waste into reusable materials, such as concrete crushing systems that produce aggregate for new applications.
