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PousLon 1x and rague CZ
www.comLechadvlsory.com
1he LvoluLlon of SmarL
CommodlLy ManagemenL
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CommodlLy 1echnology Advlsory LLC, 2014 2
)56.* #7 "#-'*-'2
lnLroducLlon ................................................................................................................................................................. 3
1he CreaLlon and LvoluLlon of a SofLware CaLegory .................................................................................................... 4
SmarL CommodlLy ManagemenL .................................................................................................................................. 3
Lka's Approach Lo SmarL CommodlLy ManagemenL .................................................................................................... 6
AbouL CommodlLy 1echnology Advlsory LLC ............................................................................................................... 8



",-'. /$,,$)0.+ 1-%-2(,(%. 3 /$,4(56 3)70&$'+ 860.(#-#('

CommodlLy 1echnology Advlsory LLC, 2014 3










8-'3#%9+'&#-
Cver Lhe lasL LwenLy or more years, global wholesale commodlLy markeLs have grown and evolved subsLanLlally
and ln Lhe process, a slzeable new sofLware caLegory has been esLabllshed. 1haL sofLware caLegory ls wldely
known as CommodlLy ManagemenL (CM) sofLware and, aL Lhe hlghesL level, lL can be deflned as Lhose sofLware
appllcaLlons, archlLecLures and Lools LhaL supporL Lhe buslness processes assoclaLed wlLh managlng commodlLles.
CM sofLware Lherefore comprlses a broad seL of funcLlons LhaL can vary conslderably dependlng on whlch
commodlLles are Lraded, whaL asseLs are employed ln Lhe buslness, where Lhose asseLs are locaLed, and whaL Lhe
naLure of Lhe company's buslness sLraLegy and assoclaLed buslness processes. CM sofLware conLlnues Lo evolve
qulLe rapldly ln locksLep wlLh Lhe lndusLry. ln pasL years, CM focused squarely on Lradlng and rlsk managemenL as
C18M sofLware, buL ln recenL years lL has been exLended lnLo Lhe supply chaln wlLh soluLlons such as shlpplng and
sLockyard bulk handllng, for example.
As Lhe sofLware caLegory has evolved, so has Lhe volume and naLure of Lhe daLa LhaL Lhe sofLware capLures,
manlpulaLes and sLores. 1oday, blg daLa ls an lncreaslngly lmporLanL aspecL of Lhe commodlLy managemenL world
as vasL quanLlLles of many Lypes of sLrucLured and unsLrucLured daLa poLenLlally hold Lhe key Lo proflLablllLy and
even survlval of companles LhaL sell or purchase commodlLles and raw maLerlals. As a resulL, Lhe requlremenLs
LhaL users place on CM sofLware are also changlng from essenLlally an afLer Lhe Lrade recordlng and reporLlng
sysLem, Lo one LhaL provldes real lnLelllgence and value back Lo Lhe buslness.
1hls whlLepaper brlefly examlnes Lhe hlsLory of CM sofLware and looks aL how new demands are belng placed on
Lhe sofLware Lo make lL lncreaslngly of beneflL Lo declslon-maklng and opLlmlzaLlon ln Lhe buslness. lL also
examlnes how Lradlng and relaLed daLa has also grown ln volume and laLency, and changed ln complexlLy, such
LhaL CM soluLlons are challenged Lo Lransform blg daLa lnLo acLlonable lnslghLs and sLraLegles for Lhe buslness. ln
parLlcular, lL looks aL how advanced, predlcLlve analyLlcs wlll be dellvered, deployed and used Lo geL Lhe mosL
value from Lhe exponenLlal growLh ln daLa belng capLured.
9:(;. 2(%('-.0$% 5$,,$)0.+ ,-%-2(,(%. &$<=.0$%& ,=&. 6-7( - <026.
>$$.#'0%.? *( -20<(? ><(;0*<( -%) )(<07(' &02%0>05-%. *=&0%(&& *(%(>0. *+ 2=0)0%2
-%) 0%>$',0%2 =&('& .6'$=26$=. .6( &=##<+ 56-0% >'$, #'$)=5.0$% &$='5( .$
5$%&=,(' @ -22'(2-.0%2 )-.- -%) #'$70)0%2 '(-<@.0,( -%) (-&0<+
5$%&=,-*<( 0%>$',-.0$% -%) -%-<+.05& @ -<< A0.6 - >$5=& $% (%&='0%2
$#.0,0B() )(50&0$%@,-C0%2 0% .6( 0%5'(-&0%2<+ 5$,#<(; (%70'$%,(%. .6-. 0&
5$,,$)0.+ ,-%-2(,(%.DE
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CommodlLy 1echnology Advlsory LLC, 2014 4
),* "3*5'&#- 5-% :1#.9'&#- #7 5 ;#7'<53* "5'*/#3(
CM emanaLed from C18M - 'C18M' ls Lhe acronym for /$,,$)0.+ 4'-)0%2 -%) F0&C 1-%-2(,(%. LhaL orlglnaLed
from whaL ls now a subcaLegory of C18M sofLware known as L18M (G%('2+ 4'-)0%2 H F0&C 1-%-2(,(%.)
sofLware. L18M was flrsL colned as a sofLware caLegory name ln norLh Amerlca someLlme afLer elecLrlc power de-
regulaLlon Look place and was subsequenLly deflned by vasey & 8ruce (2006) and by vasey & 8eames (2010).
SubsequenLly, Lhe Lerm was modlfled Lo 'C18M' ln order Lo lnclude oLher commodlLles beyond energy such as
sofLs, ags, meLals, emlsslons and frelghL raLes.
1he core funcLlonallLy of a C18M sysLem ls slmply Lo capLure Lrades, calculaLe and manage poslLlon, reporL on
exposure and accounL for Lhe varlous LransacLlons. C18M has recenLly evolved Lo CM, or commodlLy
managemenL, as concenLrlc clrcles of lncremenLal funcLlonallLy have been added Lo C18M, allowlng Lhese sysLems
Lo address Lhe needs of a much wlder markeL beyond [usL Lradlng. 1hls lncremenLal funcLlonallLy lncludes areas
llke vessel managemenL, sLorage and faclllLy managemenL, and producLlon managemenL. 1he edge of whaL
acLually consLlLuLes boLh C18M and/or CM has become lncreaslngly fuzzy and lL now overlaps wlLh oLher
appllcaLlon areas such as LradlLlonal L8, accounLlng, supply chaln opLlmlzaLlon, operaLlons managemenL,
Lreasury managemenL and oLher sofLware caLegorles.
1he genesls of Lhe CM sofLware caLegory can be found ln Lhe early 1990's, followlng Lhe de-regulaLlon of naLural
gas ln norLh Amerlca as a dlrecL resulL of lL8C Crder 636 ln 1992. AL LhaL Llme, a number of small prlvaLe sofLware
companles developed gas markeLlng sofLware soluLlons on a cllenL/server plaLform and began Lo offer Lhem
commerclally. 8y 1996, Lhe norLh Amerlcan elecLrlc power markeLs were also belng de-regulaLed and, for Lhe flrsL
Llme, Lraders were seeklng commerclal sofLware soluLlons for mulLlple commodlLles Lo manage Lrade capLure,
poslLlon keeplng, rlsk reporLlng, schedullng and accounLlng, Lhe L18M caLegory sofLware had been esLabllshed.
As wholesale commodlLy Lradlng evolved, more and more markeLs and lnsLrumenLs or conLracLs were creaLed ln
reglonal Lradlng cenLers around Lhe globe. ln Lurn, Lhls placed demands on Lhe fledgllng L18M sofLware caLegory
as more funcLlonallLy, conflgurablllLy and flexlblllLy were requlred Lo meeL Lhe lncreaslng complexlLy of Lhe
markeL. 1raders demanded more sophlsLlcaLed rlsk meLrlcs, credlL rlsk emerged as a serlous lssue ln Lhe posL-
Lnron markeL collapse, and Lhe movemenL and managemenL of physlcal commodlLles became more complex ln
an lncreaslngly globallzed markeL. Added Lo Lhls was Lhe need Lo cover a hosL of oLher commodlLles and Lhelr
parLlcular physlcal characLerlsLlcs, ofLen speclfled ln conLracLs and havlng an lmpacL on prlce. 1racklng of Lhese
physlcal characLerlsLlcs or speclflcaLlons from source Lhrough sLorage and LransporLaLlon Lo flnal polnL of sale or
purchase was also exLremely lmporLanL.
uurlng Lhls evoluLlon, Lhe sofLware caLegory became known as C18M Lo acknowledge Lhe wldenlng reach of Lhese
producLs, from energy Lo a varleLy of agrlculLural and sofL commodlLles, base and preclous meLals, and frelghL and
shlpplng derlvaLlves. 1he fooLprlnL of whaL consLlLuLed a C18M sofLware soluLlon was expandlng and growlng
rapldly.
ln Lhe lasL several years, whaL was Lhe C18M sofLware caLegory grew furLher lnLo Lhe supply chaln. Cne of Lhe
unlque elemenLs of commodlLy companles ls LhaL noL only do Lhey parLlclpaLe ln Lhe flnanclal markeLs Lo manage
rlsk buL, ln addlLlon, Lhey operaLe very physlcal supply chalns. lL was a naLural progresslon for Lhe vendors Lo
lnLegraLe deep supply chaln funcLlonallLy such as bulk handllng, processlng opLlmlzaLlon and shlpplng Lo Lhelr
Lradlng and rlsk soluLlons.
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CommodlLy 1echnology Advlsory LLC, 2014 3
Cf course, whlle all of Lhls evoluLlon and change was golng on ln Lhe commodlLles markeLs, slgnlflcanL change was
also occurrlng ln lnformaLlon processlng and Lechnologles. vendors were able Lo leverage Lhese newer
Lechnologles, lncreaslng processlng speeds, lmprovlng
Lhe user experlence, and lnLroduclng greaLer
modularlzaLlon of Lhe appllcaLlons - allowlng buyers
Lo plck and choose [usL whaL Lhey needed wlLhln Lhe
common CM fooLprlnL. 1he use of flexlble Lools meanL
LhaL Lhe sofLware could be more conflgurable and
personallzable, reduclng lmplemenLaLlon Llmescales
and lmprovlng Lhe users' lnLeracLlon experlence wlLh
Lhe sofLware. 1hese new Lechnologles have also
allowed lmproved daLa vlsuallzaLlon, lncreaslng
producLlvlLy and enhanclng rlsk managemenL capablllLles. llnally, newer archlLecLures also lmproved Lhe
connecLlvlLy of Lhe CM soluLlons maklng lL easler Lo lnLerface or lnLegraLe wlLh Lhlrd-parLy sofLware.

underlylng all of Lhls however ls daLa. 8ack ln Lhe early days of naLural gas markeLlng sysLems, all LhaL was really
needed was dally volume and prlce daLa. As Lhe lndusLry evolved, more and more daLa was generaLed, sLored and
processed. Slmple daLa seLs grew Lo lncorporaLe masslve Llme serles daLa seLs (and mulLlple verslons of Lhe same
daLa) for forward curves and expanded deLalls for deals needed Lo be capLured such as conLracL Lerms, complex
prlce sLrucLures, Llmellnes, quallLy requlremenLs, welghLs, and so on. uocumenL lmages and oLher Lypes of non-
sLandard daLa were lncreaslngly requlred Lo be sLored, especlally assoclaLed wlLh schedullng and supply chalns.
Cn Lhe Lradlng slde, sLorage of phone recordlngs, lM logs and oLher evldence of negoLlaLlons became more
lmporLanL as regulaLlons and regulaLory overslghL lncreased. 1hese regulaLlons, such as uodd lrank ln Lhe uS and
LMl8 and 8LMl1 ln Lurope, have placed lncreased demands on Lhe Lechnologles of Lradlng, requlrlng hlgh levels
of Lransparency and reporLlng, lncludlng Lrade reporLlng Lo cenLral reposlLorles. LssenLlally, as Lhe CM sofLware
caLegory expanded, evolved and maLured, so dld Lhe daLa managemenL requlremenLs - 8lg uaLa, boLh sLrucLured
and unsLrucLured, needed Lo be beLLer sLored, manlpulaLed and dlsplayed.
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A key requlremenL of CommodlLy ManagemenL ls LhaL lL needs Lo asslsL users ln maklng lnformed declslons by
Lransformlng large amounLs of daLa lnLo lnslghLs by provldlng predlcLlve and user conLrollable analyLlcs. SmarL
commodlLy managemenL soluLlons musL provlde real-Llme, meanlngful and acLlonable lnformaLlon Lo Lraders, rlsk
managers and execuLlves ln order Lo enable Lhem Lo vlew, analyze and slmulaLe poslLlons, markeL movemenLs and
rlsk meLrlcs. users need Lo be able Lo monlLor meLrlcs llke poslLlon, exposure, lnvenLory, ln-LranslL movemenLs,
scheduled movemenLs, counLerparLy rlsk llmlLs, &L, and so on by boLh commodlLy and lnsLrumenL Lype, across
boLh physlcals and derlvaLlves, enLerprlse-wlde or vla drlll-down Lo Lradlng unlL and lndlvldual Lrader levels. SmarL
CommodlLy ManagemenL musL provlde a wlde range of Lools Lo mlne, analyze and generaLe lnslghLs from
LransacLlonal daLa, for use noL only ln sLraLeglc declslon-maklng by C-level execuLlves, buL also by rlsk managers
and Lraders for LacLlcal purposes.
unforLunaLely, mosL of Loday's CM sofLware sysLems have a legacy of belng bullL as cllenL/server soluLlons,
focused prlmarlly on capLurlng and sLorlng LransacLlon daLa. Whlle Lhey do provlde some Lools Lo analyze and
reporL LhaL LransacLlonal daLa, Lhese capablllLles are by and large sLandard rlsk calculaLlons (such as vA8) and
946( =&( $> *02 )-.- A0<< *(5$,( - C(+ *-&0& $>
5$,#(.0.0$% -%) 2'$A.6 >$' 0%)070)=-< >0',&D I'$, .6(
&.-%)#$0%. $> 5$,#(.0.07(%(&& -%) .6( #$.(%.0-< 5-#.='(
$> 7-<=(? -<< 5$,#-%0(& %(() .$ .-C( *02 )-.- &('0$=&<+D J%
,$&. 0%)=&.'0(&? (&.-*<0&6() 5$,#(.0.$'& -%) %(A
(%.'-%.& -<0C( A0<< <(7('-2( )-.-@)'07(% &.'-.(20(& .$
0%%$7-.(? 5$,#(.(? -%) 5-#.='( 7-<=( >'$, )((# -%) =#@
.$@'(-<@.0,( 0%>$',-.0$%DE Mcklnsey & Co., 8lg daLa: 1he
nexL fronLler for lnnovaLlon, compeLlLlon, and producLlvlLy.
",-'. /$,,$)0.+ 1-%-2(,(%. 3 /$,4(56 3)70&$'+ 860.(#-#('

CommodlLy 1echnology Advlsory LLC, 2014 6
relaLlvely sLaLlc reporLs LhaL usually requlre ln-depLh knowledge of Lhe relaLlonal daLabase Lo updaLe or cusLomlze
as Lhe daLabases of Lhese sysLems have been archlLecLed Lo ensure LransacLlon lnLegrlLy and performance, noL for
opLlmlzed speed of calculaLlon or Lo provlslon an undersLandable daLa schema for user lnqulry. ln Lhe era of blg
daLa, Lhls ls slmply noL good enough.
ln Loday's buslness and Lechnology envlronmenL, CM soluLlons musL provlde Lhe ablllLy Lo record LransacLlons buL
Lhey musL also provlde Lhe advanced analyLlcs necessary Lo rapldly (and even ln near real-Llme) provlde acLlonable
lnLelllgence Lo users. ln many respecLs, lL ls ln Lhe area of Lhe commodlLy value chaln and Lhe commodlLy
managemenL funcLlon where Lhls approach ls belng lnnovaLed. CommodlLy lnLelllgence wlll come abouL ln many
ways, lncludlng Lhe usage of complex scenarlo analysls and opLlmlzaLlon. ln addlLlon, nexL-generaLlon sysLems wlll
leverage publlc lnformaLlon for senLlmenL analysls comblned wlLh lnLernal LransacLlon daLa Lo draw lnslghLs and
foreslghLs. 1hese nexL-generaLlon sysLems wlll use sophlsLlcaLed vlsuallzaLlon Lools Lo furLher enhance Lhe analysls
and declslon supporL. 1he new vlsuallzaLlon Lools wlll allow users Lo rapldly bulld or modlfy dashboards
Lhemselves as opposed Lo havlng Lo rely on Lhe vendor's programmlng sLaff or expenslve consulLanLs Lo enhance
or modlfy Lhem. lndeed, user conLrol ls a key feaLure of Lhe nexL generaLlon of CM producLs - SmarL CommodlLy
ManagemenL soluLlons.
1he nexL generaLlon CommodlLy ManagemenL soluLlons wlll by deflnlLlon, need Lo lncorporaLe Lhe followlng:
redlcLlve analyLlcs, opLlmlzaLlon solvers, and sophlsLlcaLed vlsuallzaLlon Lools Lo supporL Lurnlng large
daLa seLs lnLo declslon maklng lnformaLlon.
llexlble and usable user lnLerfaces LhaL allow Lhe users Lo personallze and adapL how and whaL
lnformaLlon ls dlsplayed on screen.
Modern, exLenslble and flexlble archlLecLures LhaL are opLlmlzed for performance, connecLlvlLy and
lmproved handllng of masslve quanLlLles of sLrucLured and unsLrucLured daLa.
AblllLy Lo be deployed noL only as compuLe grlds, buL also leverage ln-memory daLa grlds.
lmproved analyLlc capablllLles Lo lnclude a broader seL of analyLlcs, and sLrucLured Lo allow users Lo plug
ln cusLom analyLlc approaches.
nexL generaLlon commodlLy managemenL soluLlons musL have a llghL fooLprlnL, be aglle, flexlble and dellver
slgnlflcanL buslness beneflL by guldlng and lnformlng users LhroughouL Lhe supply chaln from producLlon source Lo
consumer - aggregaLlng daLa and provldlng real-Llme and easlly consumable lnformaLlon and analyLlcs - all wlLh a
focus on ensurlng opLlmlzed declslon-maklng ln Lhe lncreaslngly complex envlronmenL LhaL ls commodlLy
managemenL.
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Larly on, Lka recognlzed Lhe need for an end-Lo-end, lnLelllgenL CM plaLform, noL only Lo cope wlLh Lhe complex
conLracLs, prlclng sLrucLures, and flnanclal derlvaLlve lnsLrumenLs LhaL are needed Lo manage commodlLy supply
chalns, buL also Lo provlde advanced commodlLy lnLelllgence and declslon supporL. Lka's nexL-generaLlon
archlLecLure ls deslgned Lo Lurn large seLs of daLa, or blg daLa, lnLo acLlonable lnslghLs and foreslghLs. Lka's SmarL
CommodlLy ManagemenL plaLform helps cusLomers run buslnesses more efflclenLly, effecLlvely and proflLably.
WhaL ls mosL valuable Lo companles managlng commodlLles ls Lo go beyond Lhe baslc quesLlon of, AL whaL prlce
should l sell Lhls commodlLy?" Lo answer quesLlons such as:
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CommodlLy 1echnology Advlsory LLC, 2014 7
- Pow can l make sure LhaL my demand, supply, producLlon and loglsLlcs are opLlmlzed across each area?
- Pow do l measure Lhe Lrue proflLablllLy of a deal, book, caLegory, or llne of buslness, whlch lncludes oLher
cosLs such as fees for LransporLaLlon, brokerage, and lnspecLlon, plus premlums, demurrage and lnvolce
ad[usLmenLs?
- lf markeL condlLlons were Lo change, whaL producL, markeL, cusLomer and suppller mlx would be besL ln
Lhe new scenarlo?
- Whlch suppllers are dellverlng Lhe rlghL quallLy, aL Lhe rlghL prlce and rlghL Llme?

1o do Lhls, a CM plaLform musL provlde an lnLelllgence drlven archlLecLure necessary Lo effecLlvely manage and
opLlmlze a global scale operaLlon. Lka's SmarL CommodlLy ManagemenL beglns aL Lhe lncomlng supply end of Lhe
supply chaln, be lL Lhe farm gaLe, mlne, or oll well, and Lhen supporLs Lhe process all Lhe way Lhrough Lo dellvery
Lo Lhe end cusLomer, helplng Lo mlLlgaLe rlsks and efflclenLly move physlcal goods across Lhe enLlre commodlLy
supply chaln. Lka's plaLform ls analyLlcs-drlven Lo beLLer manage commodlLy value chalns and make facL-based
declslons. unllke oLher commerclally avallable flrsL-generaLlon CommodlLy ManagemenL soluLlons LhaL focus on
capLurlng conLracLs, end-Lo-end loglsLlcs, rlsk calculaLlons, and bulldlng reporLs, Lka's sofLware goes beyond Lhls
Lo provlde opLlmlzaLlon and predlcLlve analysls.
WlLh Lka's nexL-generaLlon CM soluLlon:
1he soluLlon provldes predlcLlve analyLlcs, opLlmlzaLlon solvers and sophlsLlcaLed vlsuallzaLlon Lools.
Large amounLs of daLa are Lransformed Lo lnslghLs and foreslghLs for lmproved declslon-maklng.
users beneflL from Lhe use of web-enabled, componenL and servlce orlenLed archlLecLures. WlLh Lhese
modern Lechnologles, Lka ls able Lo dellver upgrades Lo Lhe user fasLer and wlLh slgnlflcanLly less
dlsrupLlon and cosL Lo Lhe buslness whlle ensurlng a slgnlflcanLly lower LoLal cosL of ownershlp.
1he soluLlon can be dellvered on premlses, as a hosLed soluLlon, or ln Lhe cloud.
Lka's SmarL CommodlLy ManagemenL plaLform provldes facL-based, predlcLlve, and prescrlpLlve declslon supporL
Lo enable commodlLy organlzaLlons Lo beLLer manage ln Loday's complex and volaLlle buslness envlronmenL.


",-'. /$,,$)0.+ 1-%-2(,(%. 3 /$,4(56 3)70&$'+ 860.(#-#('

CommodlLy 1echnology Advlsory LLC, 2014 8
06#9' "#$$#%&'( )*+,-#.#/( 0%1&2#3( 44"
CommodlLy 1echnology Advlsory ls Lhe leadlng analysL organlzaLlon coverlng Lhe L18M and C18M markeLs. We provlde Lhe
lnvaluable lnslghLs lnLo Lhe lssues and Lrends affecLlng Lhe users and provlders of Lhe Lechnologles LhaL are cruclal for success
ln Lhe consLanLly evolvlng global commodlLles markeLs.
aLrlck 8eames and Cary vasey head our Leam, who's comblned 60-plus years ln Lhe energy and commodlLles markeLs,
provldes depLh of undersLandlng of Lhe markeL and lLs lssues LhaL ls unmaLched and unrlvaled by any analysL group. lor more
lnformaLlon, please vlslL hLLp://www.comLechadvlsory.com.
Com1ech Advlsory also hosLs Lhe C18MCenLer, your onllne porLal wlLh news and vlews abouL commodlLy markeLs and
Lechnology as well as a comprehenslve onllne dlrecLory of sofLware and servlces provlders. lease vlslL Lhe C18MCenLer aL
hLLp://www.cLrmcenLer.com.
KKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKK
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Sugar Land 1x 77479
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rague, Czech 8epubllc
+420 773 718 112

Com1echAdvlsory.com
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