Global Procurement & Materials Management (Best Practice)

RT-257 Topic Summary
RT 257

Overview

Materials management is a complex and comprehensive process involving people, organizations, technologies, and processes that manage the definition, sourcing, planning, quantification, supplier qualification, purchasing, supplier QA/QC, expediting, transportation, logistics, and control of materials and associated information across the life cycle of a capital project. Materials and related services account for a large percentage of a capital project’s total installed cost (TIC). Implementation of a materials management program contributes to predictable project outcomes, reduced costs, improved productivity, and quality.

Key Findings and Implementation Tools

1 : Most Construction Organizations Have a Structured Procurement or Materials Management Department

Most construction-related organizations have a structured procurement, or materials management department. (RS257-1, p. 5) CII surveys indicate a growing trend in the use of materials management systems by owners and contractors. 

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The majority of organizations reported regularly outsourcing Transportation and Logistics, Supplier Quality Management, Purchasing, Expediting, and Site Material Management. A properly developed and executed transportation and logistics plan will substantially increase the likelihood of timely delivery of the materials a project construction team needs. 

Post-9/11 requirements have forced organizations to increase their resources for managing import/export compliance. A majority of respondents have a dedicated trade manager and maintain up-to-date procedures for import/export compliance. Owners feel that they have a mature import/export compliance system in place, while contractors do not. 

The most significant changes in materials management in the previous 10 years are: improved technology, globalization, emergence of mega-projects, increased material costs and lead times, scarcity of materials and job space, and an increase in focus on quality and financial standards. 

Reference: (RS257-1)

2 : Growing Size and Complexity Affect Owners and Contractors

The growing size and complexity of projects appear to affect owners and contractors significantly. Workforce training, experienced personnel recruitment, and extensive risk assessment are measures organizations have adopted to address this issue.

Half of the respondents include the materials management IT system in their corporate strategy. However, the lack of interoperability of different systems and lack of access for external parties appear to be roadblocks to efficient IT implementation. It was indicated that additional training would increase the benefits from IT improvements. 

Materials management will maintain and expand its role in the early phases of capital project planning. This increased early involvement is particularly important under any market condition, whether in periods of supply scarcity and global demand surge or in economic downturns. 

About half of the survey respondents are seriously concerned with strategic supplier relationships, agreements through which strategic partners engage in long-term commitments and may share confidential information. 

Table 101 (RS257-1, p. 71)

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Reference: (RS257-1)

3 : Globalization Is a Well-Established But Complex Trend

Globalization is a well-established but complex trend. The globalization of owner materials standards, standard processes, and preferred suppliers will continue to increase as the trend becomes more pervasive. In addition, quality concerns may trigger the further development of processes to help determine when local sourcing is preferable to global sourcing. 

Sourcing from emerging markets is not as widespread as one might imagine; only 35% of respondents report having significant involvement in this type of sourcing—with more contractors than owners saying that they do. 

Figure 18 (RR257-11, p. 138)

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Globalization has enabled entities to source materials worldwide. Emerging markets now interest organizations willing to take advantage of low-cost country sourcing. However, the extra costs of expediting, supplier quality management, transportation and logistics, and customs clearance efforts can sometimes compromise these suppliers’ cost-effectiveness. 

Sustainability is a new major topic at the top management level. Eighty-two percent of respondents declare their organization to be significantly concerned with those issues. Seventy-four percent have sustainability objectives as an explicit part of their organizations’ strategic plans. 

Reference: (RR257-11)

4 : Materials Management Is Part of the Corporate Strategic Plan

Seventy four percent of the survey responses said that materials management was a part of their corporate strategic plan. According to 63% of the respondents, the use of strategic supplier relationships was part of the corporate strategy. Seventy-six percent of the companies surveyed used sourcing agreements—e.g., master agreements—at the corporate level. 

Table 52 (RR257-11, p. 54)

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The survey results also showed that the materials management groups were involved earlier in project planning than they used to be. (RS257-1, p. 6) Early project planning should include global market studies that not only identify the least expensive sources of equipment and materials of verifiable quality, but that also consider the costs and complexity of global logistics in more detail than has been customary up until now. (RS257-1, p. 32)

A great majority of the contractors surveyed acknowledged that they were experiencing scheduling challenges due to competing demands upon the subcontractors’ capacity, prompting an increase in the use of modularization. Surprisingly, in spite of constraints on available supplier capacity at the time of the survey, few organizations were purchasing lock-in of shop manufacturing capacity in advance. In addition, most organizations have experienced an increase in late deliveries and were thus increasing the amount of expediting for second and third-tier suppliers. Both types of organizations tend to use third-party providers for expediting, in-shop quality surveillance, and transactional shipping support. 

Reference: (RR257-11)

5 : Sophisticated Quality Management Systems

The majority of organizations surveyed appeared to have a sophisticated supplier quality management system that includes: inspection plans, supplier quality evaluation before selection, supplier databases, design quality reviews, and materials management process audits. Organizations also seem to do a good job at qualifying, evaluating, and monitoring suppliers and subcontractors. Forty-seven percent of respondents also reported that their organizations faced instances of non-conformance and defects more frequently. Documented quality processes and performance will become increasingly important factors in the early stages of developing the Project Acquisition Strategy (PAS).

Table 72 (RR257-11, p. 61)

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Reference: (RR257-11)

6 : Integrated Materials Management Computer Systems

Seventy-one percent of the organizations surveyed acknowledged that they have an integrated materials management computer system, usually using a combination of commercial software, custom-made software, and/or an enterprise resource planning (ERP) system. 

The refinement and standardization of interfacing among IT systems offers great potential for improvement. Materials managers should influence IT systems selection and their integration during pre-project planning. Training programs should be better integrated into project schedules so that employees’ use of materials management IT systems is continuously improving.

Table 41 (RR257-11, p. 44)

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Reference: (RR257-11)

7 : Implementation Tool #1

IR257-2, Global Procurement & Materials Management: An e-Guide to Effective Project Execution.

This guide to project execution presents all materials management functions at both the organizational and the project levels.

Reference: (IR257-2)

8 : Implementation Tool #2

IR257-3, Materials Management Planning Guide.

This implementation resource provides guidelines for preparing a materials management plan for a specific project, based on its project execution plan.

Reference: (IR257-3)

Key Performance Indicators

Improved cost, Improved on-time delivery, Improved schedule, Improved quality of equipment & material, Improved safety, Improved supplier performance

Research Publications

An Analysis of Global Procurement and Materials Management Practices in the Construction Industry - RR257-11

Publication Date: 12/2012 Type: Research Report Pages: Status:

Global Procurement & Materials Management: An eGuide to Effective Project Execution - IR257-2

Publication Date: 04/2011 Type: Implementation Resource Pages: Status: Tool

Global Procurement and Materials Management - RS257-1

Publication Date: 12/2010 Type: Research Summary Pages: 33 Status: Supporting Product

Materials Management Planning Guide - IR257-3

Publication Date: 11/2010 Type: Implementation Resource Pages: 35 Status: Tool


Supporting Resources

Education Materials

Global Procurement and Materials Management - Instructor's Guide - EM257-21

Publication Date: 12/2012 Type: Education Module Pages: Status: Supporting Product

Global Procurement and Materials Management - Participant Handbook - EM257-21A

Publication Date: 12/2012 Type: Education Module Pages: Status: Supporting Product

Global Procurement and Materials Management - Classroom Kit - EM257-21K

Publication Date: 12/2012 Type: Education Module Pages: Status: Supporting Product


Presentations from CII Events

Plenary Session - Global Procurement and Materials Management: An Integrated Process for the Next Generation

Publication Date: 06/2009 Presenter: Number of Slides: 15 Event Code: AC09

Implementation Session - Global Procurement and Materials Management: An Integrated Process for the Next Generation

Publication Date: 06/2009 Presenter: Number of Slides: 57 Event Code: AC09


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