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Commodity Management
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Commodity Management and Supply Chains A ComTechAdvisory Whitepaper
INTRODUCTION
For most raw materials and commodities, the supply chain is both long and complex.
Increasingly, firms have been focusing on these supply chains in an effort to better
control operational risks and exposures, but increased geopolitical and other risks
have now served to sharpened that focus even further.
Issues like COVID-19 lockdowns and trade continuity. Meanwhile, although CTRM
wars, for example, have meant that managing (Commodity Trading and Risk Management)
sourcing, movements, processing, production, software applications that help manage trades
procurement, contracts, storage and other and the risks associated with trading are seen
activities along complex supply chains more as critical, the broader commodity management
effectively not only reduces costs and improves aspects around managing the supply chain more
profitability, but also helps ensure business effectively are rightly gaining in importance.
Commodity Management and Supply Chains A ComTechAdvisory Whitepaper
Managing supply chains effectively is a key attribute Other critical activities include collaboration with third
of a successful and profitable business. This not only parties including vendors and suppliers and monitoring
means sourcing, moving, processing, and accounting for their effectiveness. Identifying vendors or suppliers
various activities and commodities, but these days, also that are often late or provide substandard goods or
includes traceability and tracking through that supply services can help eliminate inefficiency. In the same
chain. The ability to track end products back through vein, identifying very manual and repetitive business
the supply chain to point of origin for purposes such processes or use of spreadsheets and automating or
as food security, recall (brand protection), traceability, eliminating these can also help. Here workflow can use
environmental (deforestation, CO2 etc.), sustainability, automation and even AI to keep employees focused
social factors (slave and underage labor), regulation, on exception management and problem resolution.
supply chain optimization, and vendor optimization Managing shipping, movements, processing and other
is very important. Buyer purchase preferences and activities along the supply chain efficiently also means
regulations around social and environmental issues having transparency into those activities and identifying
require this and, should a substandard product reach any likely issues or bottlenecks.
the market, then brand protection policy requires it.
Another key aspect to supply chain management is the Managing operational risk and the effectiveness of
plethora of documents that must be created, signed, supply chain activities also goes hand-in-hand with
shared, and maintained, ranging from bills of lading to managing other risks like price and credit risk. Contracts
customs documents. Ensuring the right document is on and agreements often include optionality that needs
hand at the right time can avert a penalty or delay. to be effectively managed as well as complex pricing
arrangements. Hedging may or may not be possible transferring funds into or out of certain countries
depending on the raw material being moved and requires certain notifications and conditions to be met,
managed and whether there is a financial market for for example.
that product or commodity, thus introducing additional
complexities around managing margins and exposures. This all adds up to complexity and exposures to various
Monitoring counterparties is also a key activity in risks that can be difficult to manage, especially if the
ensuring that exposures are within reasonable and business is involved in multiple commodities each
planned ranges at all times. with their own specific supply chain and issues and
a requirement to manage cross commodity risks and
Beyond these supply chain activities, managing cash exposures. It is no wonder that digitalization has become
is also a critical activity and this often has an FX a buzz word in commodities, as any entity involved
aspect to it as multiple currencies are frequently used. with raw materials and commodities seeks to increase
Treasury and FX activities also need to be well planned efficiencies and effectiveness in their operations.
and managed, as there are also legal and contractual Eliminating spreadsheets and manual processes and
issues in funding different business entities in different replacing systems that can’t support business agility is
jurisdictions and/or ensuring adequate funding of a key thrust in IT across the industry where change is
operations along the supply chain. In some instances, the new normal.
COMMODITY MANAGEMENT
Commodity Management (CM) software solutions are now emerging that incorporate the key
functions and features of ERP solutions with that of CTRM software. They help manage all aspects
of a commodity business from sourcing to production with increased efficiency and an emphasis
on most forms of risk management. Whereas the focus of CTRM is on trade management and
market risks, the Commodity Management solution incorporates the entire supply chain, helping
manage logistics, inventory, processing, and much more.
Commodity Management solutions, with integrated management to potential issues. Furthermore, they can
workflow and approvals, document management aid in collaboration – not just between departments –
and ERP-like functionality, can help commodity firms but also with partners and business associates. With
ensure that time frames are met, risks are managed, Commodity Management software available via cloud
and costs controlled. They help increase the efficiency deployment, issues around home-based workforces
of supply chain operations and alert users and can be easily managed as well.
Commodity Management (CM) solutions have a A fully integrated CM solution may come with its own
broader footprint than traditional CTRM, although accounting solution to form a fully integrated solution
there has been a trend for CTRM software vendors to for the business, or it may require some degree of
try to extend their functionality into the supply chain as integration with a commonly used accounting package
well. CM offers the trade and market risk management like SAP or JDE, for example.
features of CTRM software but extended with integrated
ERP-like functions as well that can include: As trade margins have been squeezed and supply
• Contract management and origination functionality chains monitored more closely, there has been a
to help in sourcing and agreeing purchases and growing interest in CM as opposed to CTRM, especially
sales over a longer-term horizon. in bulk commodities like mining and ags & softs where
• Logistics including all forms of transportation, route managing the physical commodity is so critical to
and vessel management, estimated and actual cost maintaining profitable and efficient operations. This
tracking, documentation and more. has seen a number of CM solutions emerge specifically
• Inventory management at multiple locations for commodity players as well as many of the CTRM
tracking quality factors as stock is consumed and software vendors adding incremental functionality.
replenished.
• Quality management, including tracking each raw
material and quality details at each stage (e.g.
receipt, blending, packaging, etc.).
• Accounting, financials and treasury, amongst
others.
i21 is a strong CM platform that offers financials and • Collaboration with business partners and customers
accounting functionality as well as CTRM and ERP-type via portals allowing data entry and inspection of
functions like: pertinent information, reducing time spent on such
activities,
• Quality management • More efficient audits due to comprehensive audit
• Traceability and certifications trailing available in the solution that allows auditors
• Production planning to easily see what and why things were done,
• Inventory management • Centralized document repository providing easy
• Logistics and movements access to documents for those that need them,
• Coverage reporting • Time savings by integrating directly to markets for
• Contact management derivative and settlement prices,
• Portal for collaboration • Replacement of Excel spreadsheets and other
• Recipes and processing home-grown systems that can cause security and
data management issues,
As a fully functional solution available in the cloud, • Greater emphasis on overall profitability via tracking
i21 offers users a number of the business benefits costs across the supply chain and tracking of
associated with Commodity Management including: forecast to actuals,
• Ability to perform vendor assessments looking
• Fewer delayed and missed activities. Workflow, at late shipments, rejected samples and other
alerts and notifications to users drive focus to issues measures of vendor performance. Significantly
like sending shipping instructions and pricing enhanced supplier performance measurement
unpriced contracts before first notice day, to influence procurement decisions and drive
• Automation of tedious business processes via continuous improvement. Place responsibility
workflow to save employee time, where it belongs, e.g. on Grower, Vendor, Shipping
SUMMARY
Any company dealing with physical commodities is greater collaboration, more streamlined processes and
aware of just how complex and volatile that business digitalization. This in turn is driving interest in Commodity
can be. Change is the only constant in the world of Management solutions that combine commodity-
commodities, and this has become even more so over specific ERP functionality with that of CTRM software
the last couple of years due to geopolitics and the in a modern architecture stack deployable in the cloud.
COVID-19 pandemic. As trade margins are squeezed iRely, with its i21 platform, is one example of a solution
and costs escalate, successful commodity businesses that ticks many of the boxes associated with the needs
seek to effectively manage supply chains and look for for commodity management.
iRely is a leading global supplier of innovative software For more information, please visit
solutions that help its agriculture and consumer www.irely.com
products clients manage their core business
processes. Based on a single, modern and easy-to-use
platform, which can be easily configured to customer
requirements, iRely has attracted and retained a large
and referenceable customer base over its 30-year
history and developed a reputation for its laser focus on
customer success.
ABOUT
Commodity
Technology
Advisory
LLC
Commodity Technology Advisory is the leading analyst organization covering the ETRM and
CTRM markets. We provide the invaluable insights into the issues and trends affecting the
users and providers of the technologies that are crucial for success in the constantly evolving
global commodities markets.
Patrick Reames and Gary Vasey head our team, whose combined 60-plus years in the energy
and commodities markets, provides depth of understanding of the market and its issues that is
unmatched and unrivaled by any analyst group.
ComTechAdvisory.com
Email: info@comtechadvisory.com