Modelling and Inventory Management in Construction Operation Involving On-Site Fabrication of Raw Materials

Do Young Jung1, Seung Heon Han2, Keon Soon Im3 & Chung Kyu Ryu4

1Researcher, Technology Research Institute, Daelim Industrial Corporation, Seoul, 110-732, Phone +82- 2-2011-8262, FAX +82-2-2011-8068, jungdy@yonsei.ac.kr
2Associate Professor, Civil and Env. Engineering Department, Yonsei Univ., Seoul, 120-749, Korea, Phone +82-2-2123-2799, shh6018@yonsei.ac.kr
3Ph.D. Candidate, Daelim Industrial Corporation, Seoul, 110-732, Korea, Phone +82-2-2011-8262, ksim21c@empal.com
4MS student, Civil and Env. Engineering Department, Yonsei Univ., Seoul, 120-749, Korea, Phone +82-2-2123-2799, rck69@hanmail.net

Abstract

There are usually plenty of material inventories in a construction site. More inventories can meet unexpected demands, and also they may have an economical advantage by avoiding a probable escalation of raw material costs. On the other hand, these inventories also cause negative aspects to increase costs for storing redundant inventory as well as decreasing construction productivity. Therefore, a proper method of deciding an optimal level of material inventories while considering dynamic variations of resources under uncertainty is very crucial for the economical efficiency of construction projects. This research presents a stochastic modelling method for construction operations, particularly targeting a work process involving on-site fabrication of raw materials like iron-rebar process (delivery, cut and assembly, and placement). To develop the model, we apply the concept of factory physics to depict the overall components of a system. Then, an optimal inventory management model is devised to support purchase decisions where users can make timely actions on how much to order and when to buy raw materials. Also, optimal time lag, which minimizes the storage time for pre-assembled materials, is obtained. To verify this method, a real case is applied to elicit an optimal amount of inventory and time lag. It is found that average values as well as variability of inventory level decreased significantly so as to minimize economic costs related to inventory management under uncertain project condition.

Keywords

Optimal inventory management, Inventory cost, Reorder point, Optimal time lag

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Reference

Jung, D.Y. , Han, S.H. , Im, K.S. & Ryu, C.K. 2007, 'Modelling and Inventory Management in Construction Operation Involving On-Site Fabrication of Raw Materials' In:, Pasquire, C.L, C.L. & Tzortzopoulos, P., 15th Annual Conference of the International Group for Lean Construction. East Lansing, Michigan, USA, 18-20 Jul 2007. pp 367-379

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