Construction materials savings

Abstract

The rising of the raw material prices as oil and steel is putting more pressure on the consumer product companies in order to find new savings that allow them to maintain their profit margins. This work presents the proposal to obtain savings from the usage of construction materials required to complete the capital projects for one of the business units of a multinational consumer products company in Latin America. By moving to direct purchases of selected construction materials the company will save the charges added by the construction companies to procure and handle the materials and will gain the benefit of volume discounts to be negotiated on a yearly basis with the aid of consumption forecasts. To obtain these savings the methodologies used to manage projects need to be revised in order to allow proper coordination between the Engineering and Purchasing departments. New processes for methodologies such as Project Management, Cost Engineering and Construction Management require updates to support the sourcing process. The organization required to support this effort is described as well and the cost implications of this new structure and processes are calculated. In sum, the costs incurred by this program are surpassed by the possible savings, as construction material costs account for up to 50% of today's consumer product projects in the process industry.