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. 

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)

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)

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