On Time Delivery of a Project by Reducing Cycle Time

Aarthi Sundaresan, Ankur Gupta, Garima Mehra, Srikant Jhanwar, Tarun Gupta, Yashwant
Pachisia
Keywords: direct material, procurement time, construction project, cycle time, materials
management, Metro Act 2002

INTRODUCTION

Construction projects are one of a kind

undertakings requiring coordination from a
large number of players. The supply chain for
construction involves six main parties the
project owner, the general contractor, the
speciality contractor, the distributor, the
manufacturing
representative
and
the
manufacturer. The ultimate aim of the project
owner is to ensure the timely completion while
delivering a high quality product at the lowest
possible cost. However the nature of these
projects makes planning complex and as a
result procurement times suffer, this can in
turn derail the entire project.
Direct materials are at the core of any
construction process, these are the raw
materials which constitute the final product,
unlike the indirect materials which are only
required to supplement the process but do not
become a part of the final product. Example
would be bricks and shingles which would
become part of the house (final product) being
constructed and thus are direct materials.
However, the equipment procured, oil used for
machines, sand paper used are only aids which
supplement the actual construction and these
would be indirect materials. The cost of the
project constitutes the direct material cost of
the product and firms maintain this on a per
product basis.
It is important for firms to complete the project
on time. The one way to accomplish this target
is to cut down on the procurement time of
direct products since it will have direct bearing
on the overall cycle time. However, owing to

their complexity of the supply chain, many

firms have been unable to streamline this
process. Some of the causes of the long cycle
time are contracting strategy loopholes,
inefficient implementation of ERP systems,
cost constraints, inefficient planning or
forecasting and bureaucratic clearances. Most
firms have recognized that a new procurement
model is required which is fine tuned to the
specific process flows of the construction
sector and can drastically improve the project
delivery system.

THE CONTEXT
Construction is a booming sector in all
developing countries including India who need
quality infrastructure to attract the investment
in industries. Construction contributes more
than 10% to Indias annual GDP. If a country
wants to follow the path of growth it has to
invest
in the
manufacturing sector.
Recognising this fact the Government of India
had proposed an investment of around US$1
trillion dollar in the Eleventh Five Year Plan, a
9 percent increase over the last plan. The
construction sector is also the second largest
employer after agriculture, employing 35
million people and its total market size is
estimated at US$ 126 billion (Building the
Nation, Deloitte, 2014).
The Government has decided to allow 100%
FDI in the retail industry and eased access for
funding. India Infrastructure Financing
Company Ltd. has been set up by the central

government specifically for lending to the

infrastructure sector. Additionally, the
government is pushing for PPP in this sector,
currently the market is highly fragmented with
about 250 firms, many of which are foreign
firms.

evaluated. Also, implementing frameworks

like CPM, PERT etc. in the procurement plan
needs to be considered (Makarand Hastak et
al. 2008).

In a growing and competitive industry such as

this, given the above context, it is imperative
to focus on reduction of the overall project
time. Reduction of overall Project time is
heavily dependent on various factors, one of it
being reduction in direct material procurement
time.

In a construction project, cost monitoring and

control is directly impacted by the supplier
selection
practices
adopted
by
the
organization. The performance of the vendor
determines the overall project cost and
efficiency. Resource availability is a major
constraint in the on-time delivery of products
or services. In a large scale construction
project, such as metro rail, direct material
procurement already has a large lead time
owing to large volumes and costly material
due to which acquiring costs are high. Any
further delay in material delivery can lead to a
steep rise in raw material costs. Selection of
supplier and release of payment to supplier are
two main epicentres leading to time delay in
delivery of material. (Glykeria P. Kalfakakou
et al. 2010).

APPROACH TO RESEARCH
The basic key to tackle the issue of on time
delivery of project is to attack the efficiency of
the system. This being done, the aspects of
time, quality and cost are automatically
addressed.
Considering the various external and internal
factors which impact the procurement time in
the construction industry, the focus areas have
been narrowed down to the below mentioned.
Operational support activities consume a
majority of the available time in the process of
procurement thereby affecting the cycle time
and lead time.
Understanding
the
stages
in
procurement chain particular to
construction industry.

the
the

Procurement lead time can be reduced at

various stages of the direct material supply
chain process. The process in brief include
Service provider selection, funding approval,
project
procurement
plan,
contract
management and procurement evaluation. The
loopholes in the tangible, intangible and
service related transactions needs to be looked
at. Measures of logical concepts like Minimum
level Inventory, Maximum level inventory,
reorder level, safety stock, Economic Order
quantity, Material order quantity need to be

Criteria and terms of Supplier selection

Impact of organizational
practices on the lead time.

procurement

Handling people and processes correctly is a

huge time saver. Sourcing and procurement
strategies at the organization level have a
bearing on meeting the procurement time
requirements. The procurement processes may
be aligned with the business which can have
restrictions in terms of supplier selection and
other
legal
barriers.
Development,
management and control of supplier lists,
conducting
spend
analysis,
project
prioritization strategies, effective coordination
in multi project material management, etc need
to be neatly framed. An additional factor is the
interaction and knowledge transfer between
the departments in the organization which is
becoming an increasing concern and a cause
for mismanagement of material. Analysis of
processes at the system level is an important
factor (Makarand Hastak et al. 2007).

Optimum use of Information technology in

Procurement process.
Effective use of Software and database
management ERP systems increases the
supply chain efficiency. The network of an
ERP system deals with the material flow,
information flow and financial flow, which
plays a crucial role in vendor selection and
procurement. Market mediation function
which concerns with the project material
demand and supply matching, is a key task of
the Enterprise resource modelling. ERP
functions as the link between business
perspective, technical perspective and
functional perspective to Procurement
management (Henk Akkermans et al.2003).
Understanding public-private construction
partnership terms and their impact on
procurement time.
Procurement processes and strategy depends
on the type of contract signed between the
contractor and the client. For example, the
terms and conditions of Lump sum Contracts
differ from those of the Design Work
contracts. Approvals and sanctions with
respect to procurement are easier in the former
than the latter, owing to the decision making
powers lying with different stakeholders.
Effects of various Government policies and
regulations affecting the construction process
and its activities at various levels like
environmental clearance, rehabilitation act,
Metro Railway Act, 2002 in the state etc. are
also important factors to consider.
Value Chain Relationship
Different kind of integration mode in the value
chain of a companys process can have
significant impact on the sustainability of
companys competitive advantage. Many
studies conducted on the benefit of value chain
integration have focused on comparing the
ICM ratio (i.e. Cycle time for the flow of
information, material, money). Past studies

have indicated that integration of members of

value chain has resulted in increased
productivity and
profitability of
an
organisation. But these are operational in
nature and yield incremental benefit. The
success of value chain will depend on the
mode of relationship between the members. (R
Mohammed Ilyas, DK Banwet & Ravi
Shankar, 2007)
Lean Construction
The conversion process model allows us to
achieve performance improvement on
complex, fast track projects by reducing cost
and time of engineering, procurement and
construction, without considering their
interdependencies. The Lean construction
model improves performance and efficiency
by revealing those interdependencies (G.
Ballard,
1997).
Lean
Construction
implementation requires a certain sequence of
initiatives, which progressively reveal
opportunities for improvement.

BIBLIOGROAPHY
Deloitte
(2014)
Infrastructure
and
Construction Sectors Building the Nation
Glykeria P. Kalfakakou, Fevronia Z. Striagka
(2010) Construction Material Supplier
selection criteria
Henk Akkermans, Paul Bogerd, Enver Yucean
(2003). The impact of ERP on supply chain
management
Makarand Hastak et al. (2008), Analysis of
Techniques Leading to Radical Reduction in
Project Cycle Time
Makarand Hastak et al. (2007), Project
Managers Decision Aid for a Radical Project
Cycle Reduction
Kul B. Uppal (2002), Project Management
for Cost Engineering Professionals: Project
Cycle Time

R Mohammed Ilyas, DK Banwet & Ravi

Shankar (2007) Value Chain Relationship - A
Strategy Matrix
G. Ballard (1997) Implementing Lean
Construction:
Improving
Downstream
Performance