Question 2 Materials management has over the years attracted the attention of most contractor firms in the construction

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Question 2 Materials Management Has Over The Years Attracted The Attention Of Most Contractor Firms In The Construction 1 (110.83 KiB) Viewed 23 times

Question 2 Materials management has over the years attracted the attention of most contractor firms in the construction industry which is an important function to improve productivity in construction projects. With the materials cost forming a significant part of the total construction costs, proper stock management on materials has become essential which can contribute to substantial cost saving in construction operations. (b) Suppose you are working in an international leading contractor company which requires a total of 4 million bags of cement for completing a new private residential project with a contract period of 4 years. In order to make each order of cement, it will take two thirds of an hour of a purchasing clerk at $72 per hour of wages, one third of an hour of a technician with the salary of $90 per hour, and $422 for materials, phone and mailing charges. The purchase cost of each bag of cement is $100 and it has been estimated that the holding cost is 10% of the purchase cost per bag per year. You have recently been invited to a site meeting to conduct analyses in inventory control for the project. On behalf of your Project Manager, show your steps clearly to determine (i) the optimal number of bags of cement that should be ordered each time; (ii) how many orders that should be placed per year; and (iii) the total annual inventory cost. (10 marks) (c) If both the ordering cost and holding cost percentage have been changed to $800 and 5% respectively, what will be the effects of these cost changes on (i) the optimal number of bags of cement ordered each time; (ii) optimum number of orders placed per year; and (iii) the total annual inventory cost? Please round up your answers in integers. (5 marks) (d) Recommend the company with reasons on the better strategy that should be adopted in order to minimize the total annual inventory cost when comparing the original materials control plan developed in (b) with the revised plan in (c). (5 marks)