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CA Sanjay Christian

Consult Us For Construction

Stores Controls at the Construction Site

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INDEX OF POINTS COVERED

1. STORES:

1.1. Stores – Physical Controls

1.2. Material Inward verification & Posting

1.3. Material Issue/Outward & Posting

1.4. Physical Stock Verification

1.5. Control over Fuel Consumption

1.6. Raw Material Analysis

 

Stores is a very important link in the organizational chain. Normally at a manufacturing location, since the location of stores and the area where the material is issued is pretty well defined, implementation of controls is relatively very easy. But that is not the case in the Construction Sector with a very different scenario.

Lets look at the different scenarios:-

  1. Location where the material is lying is not defined?
  2. Locations where the material is to be issued changes every now and then?
  3. There are difference organizations working in the same location?
  4. Single Material is lying at multiple locations.
  5. Cost of maintaining the systems is sometimes felt higher than the value of materials involved.

 

In such a scenario, the whole dynamics of stores management change drastically. And precisely this is what happens at a construction site. Thus implementation of controls at stores of a construction site is that much more challenging and needs careful watch.

 

STORES:

1.1. Stores – Physical Controls:-

As mentioned above, and looking to the control points, the need is felt to give regard to the following physical controls to be implemented at the stores of a construction site:-

 

Store Location - Ideally Two store godowns are required - One for Cement storage and the second for items other than cement. Cement Store should ideally be built by Block / Brick work & Cement sheet or GI sheet with support of scaffolding pipes/wooden bamboo. The surface should be made even by laying PCC on the same.  Further following resources are required to be maintained at these godowns : -

  • Doors and Windows for Lights & Ventilation,
  • House keeping (cleanliness),
  • Fire extinguisher
  • Rack for proper stacking of material. The rack should ideally be made either of Iron / Plywood & Bamboo / Pipe
  • Weighing machine to weigh materials upto 100kg (This may depend on site to site)
  • Power connection
  • Computer system with keyboard, mouse, Printer & UPS.
  • Security guards in shifts (number of guards depends on size of store)

 

Steel Yard should be nearest to the store for proper supervision and control over stores. This would help in avoiding theft, misuse of Material (–e.g. Binding Wire), Machinery (e.g. Binding & Cutting Machine) & material wastages.

 

Stacking & Labeling

 

All Items should be stacked properly to ensure availability. Following points are required to be taken care of: -

 

  • Material should be kept at least 1ft above the ground surface, properly covered in order to avoid  spoilage / wastage due to Weather conditions (For example – Cement Bags, Plywood, Battan etc.);
  • Safety to be ensured;

(e.g. Heavy material to be kept on ground & light weighted material either in rack and or on top of the rack);

  • It should be easily moveable;
  • Arrangement should be made based on frequency of usage;
  • Single item to be kept at one defined location rather than multiple locations;
  • If stacking is proper the material is easily countable;
  • Labels should be affixed on the rack of each item with Material code (Additionally mention of item description is also desirable).

After completion of work / use, unutilized material should be taken back in store and should be kept at its place or at a secured place at work area with proper stacking.

 

1.2. Material Inward verification & Posting:

Normally an organization has a basic control of issuing Indents / Purchase Orders, which ultimately leads to purchases / inward movement of goods. The nature of inwards can be of varied nature like Purchases, Client Free Issue Materials (FIM), Intersite Transfer & Loan basis materials. As seen the control challenges at the construction site  are multifold. However it is felt that for any of the inwards following documents need to be generated and kept at the site level:-

  1. Documents required are Challan / Packing list / Organization Specific Format for material received from other sites / Excise Gate pass / LR / Weight slip / Royalty Challan / Test certificates / PO copy or PO references / Tax Invoice / Statutory forms (If any);
  2. Name & Address of Consignee and Consigner on challan / other documents;
  3. Unique reference number to be given to all the inward supplier documents;
  4. Since the client would be having their own check on the materials entering its premises, so it needs to be ensured that all material inwards follow the procedure mandated by the client. As any escape from the client procedures may lead to delay in project completion;
  5. In respect of material quantity and rate, it should be weighed and actual quantity should be mentioned in the challan and weight slip should be attached (for example Unit of Measurement in Kg or MT);
  6. Sand and Aggregate should preferably be purchased on CFT basis and it should be measured each time by store person;
  7. Bolder and Ruble should preferably be purchased on MT basis and it should be weighted each time by store person;
  8. To ensure exact quantity and quality verification, no material shall be dumped / allowed without pre intimation to store. This is a common problem found at the construction sites that the suppliers dump the material without getting the same verified by the company personnel. In all such cases the material needs to be rejected by the site incharge.
  9. Store needs to ensure whether all requirements of the Purchase Order from  their viewpoint have been fulfilled i.e. Brand / Quality / Technical Specification / Delivery Terms etc.;

10.  After verification of material and documents, Stores should put Material received stamp, received date and time, receiver signature and Name of site & location where material is received;

11.  Material GRN / Inward reference number from system or manual register should be mentioned on the challan / document after its posting.

12.  Comment / Remark required in case of discrepancies with regard to Quantity & Quality of Item by material receiver need to be communicated in presence of material carrier to supplier concerned to avoid any dispute later on.

13.  Reject Note required with detailed reasoning in case the material does not meet the PO standard with one copy to be given to the material carrier.

14.  Out time and date should be mentioned in the challan / other document by the security after verification of supplier’s / transporter’s vehicle.

 

1.3. Material Issue/Outward & Posting:

Material Issue at the construction site is an area prone to lot of control weaknesses. Various issues which arise in a practical scenario are as follows:-

  1. Material is issued without filling the issue slip due to work pressure / non-availability of stores personnel at the stores location.
  2. No records kept for materials issued on returnable basis like scaffolding pipes / cube moulds / testing equipments.
  3. Movement of material from one location at the construction site to another without any intimation to the stores personnel.
  4. Stocking of material at more than one location to facilitate the site operations.

Hence, similar to Inwards process, the various conditions that needs to be fulfilled for all kinds of issues / outwards like Material Sale, Client FIM return, Intersite & Loan basis materials are as follows:-

 

1.3.1. Before issuing a returnable material, clear instructions should be given to receiver that he is responsible to return the material to store and also to complete the documentation / clearance from store. In case of non-return of material, the cost shall be recovered from him.

It is also seen that valuable items like Scaffolding pipes are cut at the site by the sub-contractors to suit their requirements. Such behavior without authorization from the site incharge should not be entertained and should occasion recovery of damage charges from him. This should ideally be mentioned as one of the conditions in the work order.

 

1.3.2. Documentation in the form of Challan / Packing list / Any specific format followed for Inter-site material movement / LR / Weight slip /  Test certificates (If any) / Sales Order copy or references / Tax Invoice / Statutory forms (If any) should be available at the site along with the name & address of Consignee and Consigner, Transporter details etc.

1.3.3. Unique reference numbers needs to be allotted to all the issue slips.

1.3.4. In respect of material quantity, it should be properly weighed and  weight slip should be attached with the same with proper UOM.

1.3.5. After verification of material and documents, Stores should put Material Dispatch stamp, Dispatch date, time and signature;

1.3.6. In case of movement of material outside the security gate of the client, proper watch and authorization is required. In all such cases, normally client demands the date on which the said material was inwarded by the contractor, hence the relevant records need to be kept updated.

1.3.7. Material dispatch posting should be done in system or manual register.

1.3.8. Consumption entry for Cement, Reinforcement, Sand, Aggregate (All Grade), Boulder, Rubble, Admixture consumption and other such bulk materials should be passed along with the RA bill certification on fortnightly / monthly basis depending on the frequency at which the RA bills are raised.

1.3.9. In case of Inter-site transfer of material, one copy of Material received confirmation should be made available from the material carrier. It should be clearly informed to carrier / customer / Inter-site.

1.3.10. Proper policy should be designed to exercise Control  over daily usage and returnable basis materials like – Tagada, Pavda with Handle, Tikkam with Handle, Hammer and Safety Full & Half Body Belt etc. For these items, separate manual register should be maintained, in which issued and received transactions entry should be done on a daily basis. In case of material not returned at the day end, a memorandum debit should be raised to the concerned party, reversible only upon return of material.

1.3.11. In case of receipt of items issued on returnable basis, material document and its posting should be done with received sign / stamp. Further a reference also needs to be mentioned for the original challan no. against which the material was issued and current balance lying with the party, if the total stock is not returned. In case it is confirmed that material shall not be returned, debit note should be raised on the concerned contractor / party immediately.

1.3.12. Store person should physically visit the site at least once in a day if the locations are limited and atleast once in two days if the no. of locations are more, for proper control by way of :

i.      Identifying material lying idle or scattered at site,

ii.      Verification of material is lying in mud or in excavated holes, before back filing,

iii.      All unused materials should be taken immediately from site to store after discussion with the concerned site engineer / supervisor.

 

1.4. Physical Stock Verification:

Again unlike an normal scenario, when physical verification can be carried out in a controlled environment, under proper covered structures in a time bound manner, the scenario at the construction site is exactly opposite because of various hurdles in the form of open environment, multiple locations, items lying at heights not ordinarily reachable, various points need to be taken care of when the physical stock verification is carried out namely:-

  1. Stock Records should be updated till the last inward and outward movement immediately before the stock taking ;
    1. All audit queries related to Inward and outward vouchers should stand resolved especially the Quantitative and item code related ones.
    2. Negative items should be identified, reconciled and resolved.
    3. If one uses an ERP, then Clearance / Reconciliation of various system generated Exceptional reports needs to be done like –
      1. i.            Goods received but bills (Document) not received.
      2. ii.            Bills (Document) received but goods not received.
      3. iii.            Raw material / Goods given for job work but finished goods not received.
      4. Detailed printouts must be taken with mention of Opening, Inward, Outward and Closing Qty., with detailed Material groups along with Material code.
      5. To ensure proper and easy physical verification, material should be arranged / stacked, thus prior instructions need to be given to the stores personnel through the project manager;
      6. Stock Verification must be commenced keeping ABC analysis in mind and thus A Class items must be verified first;
      7. Quantities need to be mentioned on items by chalk / marker, column and row wise to facilitate recount and to avoid any confusion. Physical quantities should be mentioned beside the closing stock with exact location of rack / site and break up of column & row should be counted to avoid any error.
      8. Identify discrepancies with suitable justification and reconciliation;

10.  Physical stock of A class principal items should be taken on quarterly basis and the rest need to be covered atleast once in six months on a random basis.

 

1.5. Control over Fuel Consumption:

It may be noted that Fuel drives not only the vehicles at the construction site but also certain very important equipments like JCB, Miller, Excavator, Cranes, DG Set (for Power), Tractors and other site Vehicles, hence it is also stocked at the construction site in good quantities. Not only that a good amount of working capital is required to be allocated for daily fuel purchases at the site. And since we can equate fuel with cash in terms of liquidity, hence it needs proper control for which following points need to be complied with:-

  1. Stores should have resources like -
  • Fuel pipe, Filter & pump to fill fuel from one to another can,
  • Two standard size Barrels of 200Ltrs capacity,
  • Fuel small Can of 1ltr, 5Lts, 10Ltrs and
  • Scale to measure stock
  1. Lock and key of fuel tank should be in custody of store person
  2. All vehicle and equipment Meters should be in working condition.
  3. MRN or Authorisations are required in Log sheet of Project Manager & HR Incharge
  4. Physical meter reading should be verified at the time of fuel issue.
  5. Meter reading should also be mentioned in log sheet at the time of fuel issue.
  6. Received and issued signs are required on the fuel issue document with registration number of the equipment / vehicle.
  7. If fuel is issued for purposes other than vehicle/equipment usage then the purpose and  name of location is to be compulsorily mentioned.
  8. Fuel issued summary should be give to HR and Project Manger for the period required.

10.  Debit note should be issued to the concerned person / party in cases of fuel given on chargeable basis.

 

1.6. Raw Material Analysis:

Material is consumed at the construction sites on a progressive basis as the work is getting completed. Normally, standards can be fixed for the material consumption in most of the cases, but adherence to those standards is of significant importance and is a periodic exercise. Material Reconciliation of Principal items should be prepared on the basis of sales bill vs. Inward and Issued quantity duly authorized by Site engineer / Project Manager:-

  1. i.            Cement
  2. ii.            Steel
  3. iii.            Sand
  4. iv.            Aggregate
  5. v.            Admixture
  6. vi.            Binding Wire: i.e. 1Mt reinforcement work = 8 to 10kgs
  7. vii.            If any other (Specify Other Raw material):

 

Thus we see that the role of Stores Department at the construction site is very demanding. If the above points are properly complied with then it would improve the overall performance of the site.

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