RISK MANAGEMENT IN PROCUREMENT AND LOGISTICS SYSTEMS

Transcription

1 RISK MANAGEMENT IN PROCUREMENT AND LOGISTICS SYSTEMS K.S.Vignesh Post Graduate Student, Construction Engineering & Management, Department of Civil Engineering, Erode Builders Educational trust, Kangeyam ABSTRACT In Construction industry the management work depends on purchasing and logistics. In this process of management, risk is accompanied with varies failure of abiding by quality and operational requirements, cost overruns and uncertain delays in project completion. Procurement ensures that right materials are purchased at right price, from right suppliers, at right time and delivered at right place. The purchasing department is the interface between the supplier of materials and the production function.this study involves the responsibilities of purchasing department in the organization, selecting suppliers, negotiating the price, ensuring delivery, monitoring the cost and monitoring the quality and delivery performance. The aim of the this project is to identify and evaluate current risks and uncertainties in the management of material purchasing and logistics. The stages and factors were listed in asquestionnaire and the questionnaires were distributed to the respondents working in construction projects of various companies. From this survey, the various risk factors affecting procurement and logistic systems are identified, related techniques are adopted and sugestions were given in the reputed firm. Keywords PurchaseManagement,Material Purchasing, logistics Systems. I INTRODUCTION In today s world, construction projects are often complex endeavours involving many different groups and entities. Construction companies require mature and efficient processes to keep everyone on target and get the work completed on time. From the smallest residential housing development to the largest office tower project, construction company s processes must scale at the same rate. Process of keeping everything on track is impossible.the management of materials and component parts has been the most uncontrolled reluctantelement in the construction environment.in modern construction; the larger the construction project, the more sophisticated the processes needed to manage it. Every department grows in complexity, and supporting functions like Accounting and Procurement take on larger roles. 302 K.S.Vignesh These departments face a perpetual challenge to manage the Internal (core material acquisition) and External (office supplies, travel, printing, etc.) spend of the project. Construction companies can reduce their risk of waste, fraud, and abuse in the procurement cycle by looking closely at any process inefficiencies, unnecessarily high administrative costs, and spending increases/decreases. Taken individually, issues in these areas are not considered high-risk, but simply a sign of poorly designed procurement processes. When issues exist in several of these areas however, procurement risk increases, and the entire procurement process should be more carefully evaluated.because of this the management requires real time and accurate information to undertake efficient and effective planning, for execution in the project. II SCOPE AND OBJECTIVE The primary objective of this study was to study the existing unethical practices in construction industry at different level of organization and to gain knowledge regarding construction laws and regulation adopted in the construction industry. This goal was through following objectives: (i) To Explore risk management of procurement and logistics by analysing the various stages in which maximum irregularities occurring and factors that lead to high cost in management. (ii) To examine disruption risk management and operational risk control in organisation setup in construction projects. III RESEARCH METHODLOGY The methodology for achieving the above objective is as follow

2 INTRODUCTION LITERATURE REVIEW IDENTIFYING PROBLEMS IN PROCUREMENT AND LOGISTIC SYSTEMS QUESTIONNAIRES PREPARATION SUGGESTING THE EFFECTIVE PROCUREMENT PROCESS CONCLUSION Fig 3.1 Research metrology IV MATERIAL MANAGEMENT PROCESS The cost of acquiring, storing, and moving materials is an increasingly large portion of the cost of goods sold. Consider the responsibility of one materials management groups classified as Internal Process External Process The Process involved in Purchasing Flowchart The Requisitioner fills out the material requisition sheet. Store keeper receives and checks the requisition sheet. The Store keeper takes out the materials to the Head office and fills out the material issue note to the Purchase Department and archives the sheet. Purchase Department receives and checks the requisition sheet takes out the materials to the accountant Accountant takes the material requisition sheets and receipts from the Purchase department and upgrades the inventory accounting. Statistician makes the statistical statement in accordance with material files and the accounting. Director checks the statements and Send the statements to Purchase department. From the Purchase department, statement is sent to vendor of related department. The Process involved in Logistics Flowchart The material vendor check for availability of material in the frequent Warehouse keeper If it found, it is returned to store of the organisation. If it not found material order is made to related department. After the acceptance of receipt from the related department the sequential process of loading, tracking, unloading is done and the material is return to Head office. In the head office, the materials are prechecked by the purchase department and the satisfied materials are return to store 4.1 Internal Process 4.2 External Process PROCUREMENT PROCESS In most firms, functional managers within each area make independent decisions using similar techniques. The objective is to provide high-quality customer service while minimizing the cost of producing the service. Purpose of supply management is to support the transformation of raw materials and component 303 K.S.Vignesh

3 parts into shipped or inventory goods. Procurement cycle refers to a term used to describe the actions, procedures, systems and methods used to purchase and obtain the goods and services and required execute a project. Indent Purchase requisition Purchase quotation Purchase order Goods receipt Purchase invoice Payment out Goods issue Approval to management 4.3 Procurement Cycle V Questionnaire Design A Introduction The questionnaire has designed to extract the true information from the project promoters and their technical heads regarding the facts of the project and the reasons for slippages. A pre-testing regarding the validity and reliability of the questionnaire has checked by consulting with experts and analysing with statistical tool and found its suitability to use for the survey statistics of the questionnaires are shown in the followings Questionnaires are prepared based on the following parameters General details of the respondents Materials identification factors Selection of suppliers Problems in qualifying suppliers Problems in effective procurement management Safety stock level of material Site management related factors Benefits of effective procurement management of materials Benefits of effective logistics systems 6.1 Likerty scale After the questionnaire is completed, each item may be analyzed separately or in some cases item responses may be summed to create a score for a group of items. In order to be able to select the appropriate method of analysis the level of measurement must be understood. For each type of measurement, there are appropriate methods that can be applied and not others. Ordinal scale is a ranking or a rating data normally users integers in ascending or descending order. The number assigned to the agreement or degree of influence (1,2,3,4,5) don t indicate that the interval between scales equal, nor do they indicate absolute quantities. They are merely numerical labels. Ascending ordering scale was used in this research were 1-Low, 2-Very low, 3- Moderate, 4-High, 5- Very high. While considering problems in effective management the scale fixed were 1-Always, 2- Often, 3= Daily, 4- Sometimes, 5- Never. For benefits of effective procurement management 1- Little degree effect, 2- Mild degree effect, 3- High degree effect. The purpose of this step is to discover if the questions are well understandable or not, also to find out any problem that may arise in filling the questionnaire. From the pilot study it appears that questions are generally clear. However, it seems some respondents find difficulties in understanding some questions. Therefore, the questions were modified to be clearer. The following items are summary of the main results obtained from pilot study 1. Questionnaire should be started with a cover page 2. The first page of questionnaire should be general information about the organization. 3. Some factors and sentences should be modified or represented with more details. 4. Some factors were repeated more than one time with the same meaning. So it should be to eliminate these repeated factors. 5. Some local factors should be added as recommended by external guide which affect the delay in the organization 304 K.S.Vignesh

4 Always Often Daily Sometimes Never Always Often Daily Sometimes Never International Journal of Engineering Technology, Management and Applied Sciences 6. Some factors and sentences should be modified in order to give more clear meaning and understanding. 7. There are some parts of questionnaire required to be regulated well. 8. Some factors should be rearranged in order to give more suitable and consistent meaning. Requesting Process No 1 2 Problems Is risk exists in accounting department while verifying sufficient unobligated funds that meets proposed expenditures In the process of requisitioning for special purpose materials whether the technical specification are included Purchasing Process No Problems Is there risk exists in purchasing of materials that made in accordance with applicable legal requirements Whether risk exists while prohibiting splitting orders that is used to avoid higher levels of approvals Is there risk exists in the process of acquiring adequate number of price quotations obtained before placing orders not subjected to competitive bidding Is there risk exists with purchasing personnel based on experience In nature and size of purchase materials whether there prevails risk with organisation structure in case of recognition 3 4 Is any appropriate amount charged for the purchase requisition While requisitioning is there is a chance for risk due to renumbering 6 7 Whether risk exists in open purchase orders that accordance with record and agreements maintained Is there is chance of risk when following same controls and approvals for all purchase orders 305 K.S.Vignesh

5 Always Often Daily Sometimes Never International Journal of Engineering Technology, Management and Applied Sciences Receiving Process No Problems The ranking of factors was calculated based on Relative Importance Index. The Relative Importance Index method to determine the relative importance of the various causes, time and cost overruns Is risk exists while receiving purchase orders and reports directly from issuing departments Whether there is a chance of risk in payments made only on the basis of original invoices In account department during recording of partial deliveries occurrence of risk Is risk occurs with vendor debit balances in the process of receiving and collecting. Whether steps taken to ensure that all goods received are accurately counted In examining the materials meeting quality standards is there is a chance of occurring risk Is there risk exists in reordering of materials that occurs due to damages or shortages If copies of receiving reports that not sent directly to purchasing, accounting department, whether it seems difficult to inventory record keeping Where, n1 = number of respondents who selected the problem is Always n2 = number of respondents who selected the problem is Often n3 = number of respondents who selected the problem is Daily n4 = number of respondents who selected the problem is Sometimes n5 = number of respondents who selected the problem is Never 5.3 Suggestions to reduce the risks in procurement and logistics systems Maintaining of standard procurement document Performance report of suppliers Quality of materials past records Financial status Price competitiveness Delivery terms Payment terms Updating the database of local suppliers Updating the database for materials price when changes occurs ACKNOWLEDGEMENT Sincere thanks to my college institution for providing facilities for successful completion of the project. I should thank the department staff and my guide for their constant guidance and valuable suggestions towards the completion of this project. I would express my thanks to the firm and working staff for providing the necessary detail for my project. 5.2 ANALYSIS METHOD Analysis methods are used for analysis a risk factor in apartment buildings and to rank the important factors affecting the time and costs overruns in apartment buildings Relative Important Index (RII) REFERENCE [1]. AshwiniR.Patil, and SmitaV.Pataskar, (2013), Analyzing Material Management Techniques On Construction Project, International Journal of Engineering and Innovative Technology, vol.3(4),pp K.S.Vignesh

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