ASSIGNMENT: CONSTRUCTION FINANCE MANAGEMENT & COST ACCOUTING

Assignment
Management Information System

NICMAR
VIKRAM JAIN, REG. NO: 29-05-11-7144-2111, COURSE: NCP-28, MODULE: 12

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Assignment:-

You are a project Manager on a construction of Hydel – Power project comprising

of four main works viz. Main Dam, Weir, Electrical Power Station and Tunnel. The
requirement of ten-construction materials including cement, steel (six sizes),
sand, aggregate etc. needs to be monitored daily Consumption, requirement,
resources on site and in depot need to be checked every day. Design an M.I.S. for
efficient working suitable data.

INTRODUCTION

Scope of work: Construction of Hydro-Project Project:

The above project is divided into four parts i.e.:

1. Main Dam
2. Weir
3. Electric Power station
4. Tunnel

1. MAIN DAM:

Normally dams are being constructed with Earth material, Masonry works and
concrete works. In accordance with the huge scope of work, amount of material
and manpower required for such project is huge. Due to the huge scope of work
proper material planning is required. The types of material required for Main dam
are basically Murom, rubble for soling & U.C.R., (sand, metal, steel, and cement
for R.C.C. work), structural steel etc.

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2. WEIR:

Normally weir is being constructed inside the dam wall towards the water
catchment area. The structure will be round RCC walls with structural steel for
supporting the gates. The gates are being fabricated with structural steel. So the
types of material required for the weir is cement, sand, reinforcement,
aggregates, structural steel etc.

3. ELECTRIC POWER STATION:

Power station consists of main switchyard control building and switchyard.

Building required RCC works, U.C.R. Masonry, brick masonry work, plaster, tiling,
paints, doors and windows and switchyard equipment’s. Switchyard consists of
structural tower, high-tension power lines, and 40 mm aggregates for metal
packing, proper drainage systems, and proper permanent fencing with gates. The
average height of the fencing should be minimum 2.00 m. Proper road for the
movement of equipment’s and vehicles. The road should WBM with two layer of
bitumen.

4. TUNNEL:

Tunnel is specialist job. For tunnel you need to have dragging equipment.
Excavation should be with rock breaker & shifting of materials from tunnel site to
outside area.

DESIGN OF MIS FOR CONSTRUCTION PROCESS:

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Due to vast development of construction technology and techniques of

construction management, it has becomes necessary to build up proper
management information system to fulfill the need of the management to
monitor and control the project effectively.
M.I.S. is a communication process in which information is recorded, stored and
used for decision making with respect to planning, operating and controlling. MIS
is not new but only computerization has taken place in it. Due to computerization,
speed and accuracy can be achieved and large volumes of data can be stored,
which helps in variety of alternatives to take decisions.
When a MIS is to be designed, it’s scope objective, need and nature should be
properly defined. The objective of the MIS is derived from the objective of the
Company.

MATERIAL MANAGEMENT ORGANIZATION:

The basic materials required for all above project: -- Cement, Aggregates, sand,
reinforcement, Murom, rubble for soling, rubble for UCR masonry walls,
structural steel for weirs and gates, structural steel with coating for switchyard
towers, 40mm aggregates for switch yard etc.
The basic needs of quality material management is to have readily available
quality materials required by the organization and to keep optional levels of stock
of essential & more used items.
Strategic

 Developing vendors for critical items

 Determining optimal levels of inventory

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 Reducing varieties of inventory

Tactical

 Developing vendor’s performance measures

 Determining the impact on material cost, availability and procurement with
design changes and now product introduction
 Determining optimal re-order levels
 Controlling high value inventory
Operational

 Goods received, rejected and issued

 List of excess and deficient items received
 List of items rejected & backlog of supplies
 Critical items received and value of inventory in hand
 Stores in transit and in inspection

INVENTARY CONTROL:

In material management, INVENTARY CONTROL is an important function. The

basic need of I.C. is to ensuring the continuity of the construction work with
minimum investment in material is fulfilled. It is mainly concerned with laying
down the policies regarding how much quantity of material should be held in
stock so that the main aim of the material management can be fulfilled.

MATERIAL MANAGEMENT CALCULATIONS:

The Economic Order Quantity or Lot Size can be worked analytically. The relation

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between various parameters was developed by R.H. Wilson and F. Harris and is
known as the Wilson Harris Square Root formula.
The relation is worked out below and is based on the assumptions:
a) Demand over the period of cycle is constant and is known in advance
b) Consumption of material occurs at uniform rate.
c) The price of material is independent of the lot size of order.
d) There is no lead time in the replenishment
Let
A=be the annual demand in terms of units.
Q=is the lot size order at a time in units.
P=Price of material in terms of Rupees per unit.
H=Annual inventory carry cost/holding cost expressed in rupees of inventory.
S= ordering cost.
Since the stock is depended at uniform rate over the cycle period, inventory
carrying cost/holding cost can be the cost over the average stock.
As Q, increases the number of order hence ordering cost reduces, but inventory
carrying cost increases, and vice-versa. The economic lot size we have to balance
the two cost of opposite nature.
If Q is the lot size the average inventory will be Q/2.
i) Inventory carrying cost will be
= (Q/2) x P x h
ii) Number of orders over a year
= A/Q
Total ordering cost = (A/Q) x S
Thus the total cost T= i) + ii) = QPh/2 + AS/Q

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We have to find the most economical order quantity for which T is minimum
value i.e. dT/dQ should be equal to zero.
i.e. dT/dQ =Ph/2-AS/Q2
AS/Q2=Ph/2
Q2/AS=2/Ph
Q=√ (2AS/Ph)……………………………… (i)

ECONOMIC ORDER QUANTITY:

The economic order quantity can be worked out graphically on the basis of the
balancing the cost of opposing nature. From the careful examination of the graph
(see attached), it is found that the graph the total cost is rather flat in the region
of the cost. This indicates that the EOQ in this region will not very much and as
such one costs and inventory cost or (a) working out the ordering costs and
inventory carrying cost or (b) pinpointing the exact EOQ.
EOQ= √ (2*A*S/P*h)

LEAD TIME:
Material procurement is based on lead-time of material to be procured. As the
name implies, it is the period that elapses between the points of time when the
need for a material is contemplated and the point of time the material actually
available on the site of construction for use.
If no lead-time is necessary (a rather imprecation proposition) it would be very
easy to purchase material knowing its need in construction. Even if procurement
through purchase involves a lead time which is certain, the problem could be
tackled by planning sufficiently in advance so that the need for the materials

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assessed well ahead of the its actual use and the lead time is taken the care. So
lead time is very important while purchasing the material otherwise its affect will
be as per following:
 The lead-time in purchase is uncertain and if it is delayed it will result in
stoppage of work.
 There may be unexpected shortages due to scarcity of material or some
unexpected difficulties in transportation.
The continuously rising prices and small quantities purchased frequently may
make the material costlier.

SAFETY LEVEL:

At is always better to have safety stock on site. Because any circumstances the
material is not coming on the site is stopped. Then it will cause lot financial
impact on the project. So you need to have safety level of each stock of the
material

KINDS OF MIS REPORTS REQUIRED

Various MIS reports on inventory should be submitted to management frequently
and at regular intervals. This will enable the management to take necessary action
where there is any deviation from the budgeted figures or the target. The
following MIS of inventory prove to be effective to achieve this goal.
Statement of General Purchase items of Inventory
 Recording of Inventory Report
 Product Cost Monitoring Report,

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 Freight Cost Monitoring Report

 Monitoring Finished goods Reports
 Inventory Dispatch Report
 Stores Inventory Report
 Dead Stock Disposal Report

FREQUENCY OF MIS REPORTS

I. Name of report
II. Frequency of Report -Daily /Weekly /Monthly
III. Freight Cost Monitoring Report
IV. Monitoring Finished Goods Reports
V. Inventory Monitoring Report
VI. Inventory Dispatch Report
VII. Stores Inventory Report
VIII. Recording of Inventory Report
IX. Dead stock Disposal Report
X. Product Cost Monitoring Report
XI. Statement of General Purchase

ITEMS OF INVENTORY:

The frequency of above reports conform to some particulars sets of facts and
circumstances and can be adopted with little modification to meet individual need
and requirement
 Inventory Monitoring Report

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 Materials Management Organization

 Inventory control measures
 Two bin system

SITE STORAGE AND REPORTING:

In Construction projects store department plays a very important role. When any
new projects start the Project Manager will first think about the site office and
site store. In addition to that the Project Manager needs to prepare the Project
Implementation Plan. In the project Implementation plan Project Manager needs
to think about the store and storage area.
There are two types of stores:
 Open storage
 Closed storage
Before making the open storage yard, Project Manager needs to think logistics of
the projects. Project Manager needs to think internal roads and access roads to
the open storage area.
 Integrated reporting system
 System development, data processing and flow charting
 Computer applications, file design
Data communications, file design
System design specification
System analysis and design.

MIS FOR INVENTORY CONTROL

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The main goal of materials management is to have readily available materials

needed by the organization and to keep optimal levels of stock of items. To
achieve this goal the certain types of information would be needed. This
information is discussed in this chapter.

Introduction

Since materials arc equivalent to cash, and since they make up an important part
of the total cost, it is essential that materials should be properly safeguarded and
correctly accounted for. Proper control of material can make a substantial
contribution to the efficiency of business. The success of a company largely
depends upon efficient purchasing, storing, consuming and reporting of materials.
Besides, material pilferage, obsolescence, careless handlings, negligence in
checking materials may lead to reduce profit and hence it is desirable to have a
good stores organization to obtain the maximum advantages out of it. A good
system of material cost control reduces the cost of storage, capital tied up in
inventories and risk of loss from fraud and theft. It helps in keeping perpetual
inventory and other records to facilitate the preparation of accurate material
reports to management. It eliminates waste in the use of material. Moreover, it
prevents production delays due to lack of materials by supplying proper
quantities at the right time. Proper material control system can make a
substantial contribution to the efficiency of a business. Even a small saving in
material costs results in an increase in profits, so it is imperative to operate an
efficiency system of material control.

OBJECTIVES OF MATERIAL DEPARTMENT

The main objectives of Material department for the purpose of MIS reports are

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1. To maintain an uninterrupted supply of materials.

2. To keep records of loss of production due to non-availability of material

3. Reduce the time and costs of detefll1ining and ordering material requirements.
4. Allow non-disruptive changes to production schedule.
5. Forecast future needs for ordering material.
6. Forecast changes in material requirements resulting from production schedule
change.

KINDS OF INFORMATION REQUIRED FOR MIS REPORTS

The following information are usually required by material department for MIS
reports.

 Inventory Monitoring
 Vendor Payment
 Vendor Satisfaction
 Present Stock Position
 Efficiency of Buying
 Statement of Price Revision
 Recording of Material
 Dead stock Disposal
 Loss of Storage
 Critical Shortage
 Excess Material Issue Monitoring
 Product Cost Monitoring
 Scrap, Spoilage, etc.

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 Statement of General Purchase Items

 Material Budget

KINDS OF MIS REPORTS ON MATERIALS REQUIRED

Various MIS reports on Materials should be submitted to management frequently

and at regular intervals. This will enable the management to take necessary action
where there is any deviation from the budgeted figures or the target. The
following MIS reports on materials prove to be effective to achieve this goal.

NAME OF REPORT

 Critical Shortage Report

 Production Loss Report
 Inventory Monitoring Report
 Vendor Payment Report
 Vendor Satisfaction Report
 Price Revision Report
 Recording of Material Report
 Dead stock Disposal Report
 Excess Material Issue Monitoring Report
 Product Cost Monitoring Report
 Statement of General Purchase Items
 Material Budget Report
 Bin Card
 Schedule of Quotations

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 Stores Inventory Report

Besides above reports the reports on the following matters on a period to period

basis should also be made available-

1. Summary of materials receipt, issue, etc.

2. Quantities and values of materials regarding receipt, issues and stock should
be included with cumulative figures.
3. Turnover rate: Management may be interested in total figures and possibly in
turnover rate of very expensive materials or products.
4. Availability of stocks and market trends: The market position with regards to
future deliveries and market trends together with price movements.
5. Present stock position: Any significant decrease or increase in amount of
present stock with that of last period may be reported to management. As stock
reflects, capital unavailable for other purposes, management may be interested
to the ratio of stock to net working capital.
6. Efficiency of buying: This report shows how efficiently the purchasing
department served the production departments. It reports how many working
hours were lost due to delays caused by lack of materials; was there much
discrepancy between the price paid for materials and supplies and market price at
the time of purchase, purchase department efficiency, etc.
7. Value analysis: This report shows the result of investigations into such
problems as:
a. Could components manufactured internally be bought at less cost from
specialists?
b. Would a cheaper material do the job?

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c. Would less costly designs work as efficiently as existing designs?

8. Variances: If standard costing is in operation the material cost variance should

be analyzed into further details. Materials price variance would reveal the
buying efficiency or market fluctuations; material usage variance would reveal
efficient or inefficient use of materials or bad quality of materials. Materials mix
variance would show the effect of changes in the mix of materials.
9. Input-output ratio: In process industries it is a valuable report to show the
percentage losses that have occurred at each stage. It measures the productivity
of material.
10. Scrap, spoilage, loss of storage: Special reports on scrap, obsolescence and
abnormal losses of material amounting to a figure in excess of a certain amount
should be submitted to management.

SYSTEM DEVELOPMENT LIFE CYCLE

The traditional software development methods are structured system analysis

and design (SSAD) by Ross: the Requirement Driven by Alford and the Structured
Analysis and Structured Design (SASD). All these methods deal with function and
data separately. The modern methodology is object-oriented, where the
functions and data separately. The modern methodology is objected oriented,
where the functions and data definitions are viewed together as an object.
A System Development with the SSAD the similar approaches are difficult to
maintain. The reason is that for each function and its behavior the data structured
is defined. The functionality behaves correctly under the conditions of rigid data
definition and structure. However in real life time the data format changes, call-in

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for change in the programmed.

DATA PROCESSING:

In any information system application, the method generally followed is to design

modular and hierarchical steps of processing leading to an output in a report form
or information having certain value specific or perceived as seen by the user. The
steps involved are data processing, transaction processing, application processing
and system processing.
Data is the smallest automatic entity in the information system which is basic to
build the information system. The automatic data entity is defined as the value
attached to an attribute which has a character, meaning and presentation
providing specific message and understanding to its viewer or user.
 Hence, data processing means following steps or stages to be implemented
before the data is accepted in the system for usage.
 Confirming the character, the structure and presentation Vis-à-vis data
design.
 Checking the value of the data Vis-à-vis data value specification such as
single specific value, range of value and limit ranges.
 If a non-conformance is seen, point out the error and seek corrective
response before the processing controls shifts to a new field.

SYSTEM FLOW CHART

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Hydel – Power project

Resources Document procured at site including mobilization of man power

Consumption
Utilization of records of files
Resource resources pertaining to
allocation available resources

Wastage of Update Records

resources depending of
physical
balance

Valid File of All Data

Master File
Records related to completed jobs

Data Processing

Progress related to billing amount

Out Put File

Screen Display
Back Up Information Report related to completion of task

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RECOMMENDATION / CONCLUSION

MIS play a very important role in the organization. With a good MIS support, the
management of marketing, finance, production and personnel becomes more
efficient.
The MIS satisfies the diverse needs through a variety of systems such as query
systems, analysis system, Modeling system and Decision support system.
MIS helps in Strategic planning, Management control, Operational control and
Transaction processing

BIBLIOGRAPHY

 Management information system -------- Waman S Jawadekar

 Study material of NICMAR

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