It is, therefore, necessary to constantly follow up with the suppliers and many a times with transport carriers. The transport department, these days considered part of the logistics department, has to track the truck as it travels to know its exact status, whether it will arrive at the factory on time with the vital raw materials to keep production going. Now times have changed, due to the advent of information technology. The transport company can in turn inform the logistics manager the time of arrival of the truck at the factory. With the introduction of HAS, the logistics managers are now better placed to predict the exact arrival of the goods and can plan their materials requirement better and more efficiently.
Material cost is a major component of the finished product.
Depending on the industry, the material cost varies between 40 per cent and 65 per cent of the cost of the finished product. While one way of generating profits is by boosting sales through aggressive marketing effort, the other way can be to follow prudent materials management techniques such as reduction in raw materials cost, inventory carrying cost, transportation cost, etc., all falling under supply management which is part of logistics management. In an industrial unit, inventory consists of thousands of items with varying prices, usage rate, and lead time. It is not possible for a materials manager to keep track of all the items, except by using some modern management techniques. In practice, it has been found that normally a few items account for the bulk of the total annual consumption value of materials.