Entries for 'Commodity Management'

Over the past decade, Brazil has grown to be the largest economy in Latin America and a major player in global agricultural production. As the world’s largest exporter of sugar, it produces around 20% of the world’s supply annually. In addition, Brazil is a leading exporter of chicken, coffee and soy beans. A significant portion of the world’s economy is dependent on the continued success of agricultural exports, and industry leaders are recognizing the need for advanced commodity trading and risk management (CTRM) solutions that help maintain a competitive advantage by managing volatility and optimizing supply chain efficiency.

In an effort to support the growing need for advanced CTRM solutions in the Brazilian market, Triple Point recently hosted an agriculture-focused Commodity Management lunch in São Paulo. More than 30 regional industry executives from companies including Algar Agro, ADM, BRF Brazil Foods, and Noble Group gathered at the stunning Bar Des Arts for an afternoon of presentations, networking, and fine dining.

Triple Point executives teamed up with Guilherme Nastari of DATAGRO and Eduardo Barros of Accenture to give a complete perspective of current agriculture market trends and Commodity Management best practices.  Attendees learned how gaining a transparent, integrated view of physical and financial position in real-time enables them to maximize the impact of volatility on the bottom line. The event was very successful with positive feedback from all who attended.

Visit our Web site to learn how Triple Point solutions can help manage volatility and risk in your business.

Triple Point will join CPOs from Barilla and Chesapeake Packaging on a  webinar panel on April 18th, to discuss commodity risk and potential solutions. For more details, click here.

Did you see the recent headline: Samoa Air to price tickets by   passenger weight?  All fat jokes aside, the underlying logic for the pricing change is so Samoa Air can find the best way to manage jet fuel costs.  Each pound shed from a plane saves the company 14,000 gallons of fuel each year.  At roughly $3.03 per gallon, that’s $42,400 per year that drops to the bottom line for every one pound reduction.



Analysts have been bifurcated in their opinions of Samoa Air’s new pricing scheme with some thinking it’s a brilliant idea and others that believe it can’t work.  I’ll leave it to the pundits to debate the pros and cons of the best way to price airline tickets.  But the concept of finding new ways to manage commodity risk is not at all surprising.  Managing commodity input costs is the next major challenge for many organizations.



It’s not just airlines that have the daunting task of managing commodity input costs such as fuel.  Faced with fundamental changes in the commodities and energy market environment, most manufacturers, including beverage, food, CP, chemical, and industrial, are wrestling with the best approach to protect margins from volatile and rising commodity costs.  The risk runs a wide gamut of costs including energy to run plants and distribution fleets, raw materials that are inputs to products, and packaging for finished goods (e.g. aluminum, cardboard).  Commodity costs are a major percentage, and the most volatile, of a manufacturer’s spend.



To preserve margins, manufacturers must move quickly to approach commodity procurement differently and more proactively than ever before. While not traditionally viewed as commodity trading organizations, manufacturers can learn from leading commodity trading houses and adopt new processes, tools, and measurements required to optimize raw material acquisition while ensuring compliance with new regulatory demands.



It’s shocking, but I still find many companies that manage commodity risk in spreadsheets.  Today’s complex and volatile markets require Procurement to use sophisticated software tools such as Commodity XL™ from Triple Point to not only ensure coverage, stay within budget, and deliver the material when manufacturing needs it, but also to analyze commodity risk and perform scenario analysis.  The new benchmark for procurement organizations is how well spend is managed relative to market prices and competitors, not just how well the budget is managed.



As I said, Commodity Management is the next big thing…

The US Midwest is suffering its worst drought in decades.  The US Department of Agriculture (USDA) recently dropped its corn yield forecast from 166 bushels per acre, made earlier this year, to 123 bushels per acre.  The expected shortage of corn is causing prices to surge.

Corn has multiple uses – it is used as fuel (ethanol), animal feed, or directly as food.  Roughly 40% of US corn production goes towards ethanol, 36% towards feed, and the rest towards food.

There are several concerned groups that believe the Environmental Protection Agency (EPA) should relax the ethanol requirement under the Federal Renewable Fuels Standard act, which states that there must be 13.2 billion gallons of corn starch-derived biofuel produced in 2012.  The UN has called for an immediate suspension of the US-mandated use of ethanol.  In addition, a coalition of beef, pork, and poultry producer associations have called for a cessation of the ethanol requirement.

Whether the EPA will ease the ethanol requirement is not the most important question – the real question is how do we plan to deal with rising agricultural commodity prices and volatility in the long term? The corn shortage might be a one season event, but volatile agriculture and softs prices are here for the long term. 

We have an expanding world population that is forecasted to grow from 7 billion to 10 billion in the next 35+ years.  As part of this population growth, there is a rapidly growing middle class across China, India, and other parts of Asia.  China and India alone are doubling their per capita incomes at approximately 10 times the rate and 200 times the scale achieved by Britain’s Industrial Revolution in the 1800s.   This growing middle class wants to eat higher on the protein scale (more meat which needs more animal feed).  And it appears we’ve hit a pattern of severe weather events including droughts, floods, extreme temperatures, etc.   These long term trends will drive acute commodity price swings – which is, as we’ve said before, the new normal.

All companies in the food supply chain, from upstream to downstream, should be putting plans and commodity risk management systems in place to handle price volatility.

Mobile Commodity ManagementIn just a few years, mobile technology has reshaped the landscape for businesses everywhere. The growing presence of smartphones and tablet devices in the workplace has forced companies to take a sharper look at the benefits mobile applications offer.

Previously, it was impossible for certain jobs to be performed away from a workstation. The mobile revolution has changed those rules. With the arrival of powerful mobile devices and sophisticated mobile applications, it is now possible for employees to perform tasks, previously restricted to their desktops, from any location at any time. And therein lies the value that mobile technology can offer: the ability to untether employees from their workspaces while increasing productivity. For this reason alone, companies are exploring ways to adopt new mobile solutions into their infrastructure in order to maintain an edge over the competition.

Software vendors across all industries are looking for ways to establish themselves in the mobile frontier. The challenge facing these vendors is to find a way to deliver solutions that make sense in a mobile world. The first temptation is to simply repackage existing desktop software and offer it on mobile platforms. This tactic fails, however, to recognize that a mobile solution cannot comfortably accommodate the same movements and actions that might be found in standard computer software. Vendors must accept that the answer lies in preserving functionality while promoting simplicity.

This fundamental concept has helped distinguish the visionaries in mobile technology from the rest of the competition. As software industries saturated with players hum with promises of new mobile initiatives, only a handful of companies actually deliver on such promises. This is especially true of the Commodity Management world. For almost two decades, Triple Point Technology has outpaced its competitors in this industry by producing unmatched Energy and Commodity Trading and Risk Management (CTRM) solutions. When it comes to mobility, Triple Point is the only Commodity Management company today that has managed to bring mobile CTRM products to market. In just under a year, Triple Point has already managed to produce four distinct mobile applications capable of transforming the way companies manage commodities by empowering staff to perform key operations anytime, anywhere.

To read more about Triple Point’s mobile commodity management solutions, click here

commodity-procurementHeavy users of raw materials face a huge challenge. The prices of many of the world’s key commodities reached all-time highs last year, and volatility across the markets was more than enough to create huge problems for companies in the industrial manufacturing and consumer products industries.

It’s easy to find startling examples of price volatility in every category from arable crops and metals to timber, oil, and chemicals. And it’s also easy to see the consequences of such volatility in companies’ bottom lines – time and time again, there are stark reminders that sharply rising raw material costs can impact profitability.

For example, spice and condiment manufacturer McCormick saw first quarter profits hit by 3% because of higher than expected raw material costs. And Swiss agribusiness company Syngenta cautioned that its 2012 results would be impacted for the same reason.

According to a new white paper on Commodities Management from Procurement Leaders, there are several ways to fight back, including hedging, forming strategic supplier alliances, and leveraging advanced technology solutions. The paper provides a good primer on the subject, and discusses how companies including Unilever have successfully controlled skyrocketing raw material costs. Read it now.

We hosted our Global User Conference last week in Barcelona. Situated in the stunning Hotel Arts, we had users attending from across Europe, Africa, North and South America and Asia. It was a really successful two days packed with interactive product sessions, customer case studies and some great networking and hospitality.

As part of Triple Point’s ongoing commitment to be the best solution partner, users were given the opportunity to influence product roadmaps in the Customer Driven Development meetings. We also had some great tips and tricks sessions to help users gain a greater return on their investment in Triple Point solutions. Additionally, we showcased our new mobile apps during an exciting live demonstration.

We would like to thank all the users who attended and also the 9 Partners who kindly sponsored the event. Focal Point 2012 sponsors were Structure Group, DataGenic, Deloitte, FEA, Lacima, Morningstar, Opportune, Softcom Solutions and ZE PowerGroup.

We look forward to the next Focal Point!

Asia PacificAccording to McKinsey, Asia’s global middle class is likely to grow by three billion people over the next 20 years, and China and India are doubling per capita incomes by approximately 10 times the rate and 200 times the scale achieved by England’s Industrial Revolution in the 1800s.

This massive middle class expansion has fueled demand for commodities such as oil, coal, and wheat. More and more Commodity Management companies dealing in the Asia Pacific (APAC) region are realizing that in order to ensure price volatility doesn’t diminish profitability, they need advanced technology solutions such as Triple Point’s Commodity XL™ to optimize supply chains, improve decision-making, and minimize risk.
 
In 2011 Triple Point experienced record growth in APAC, with year-over-year revenue for the region increasing 75%. APAC customers include China National Offshore Oil Corporation (CNOOC) Limited, China’s largest producer of offshore crude oil and natural gas, as well as Bayin Resources, Dhanlaxmi Bank, Marubeni, Merit Chartering, and State Bank of India. Triple Point has also significantly expanded its staff in Asia Pacific, growing from 250 to over 400 employees, in order to ensure full support for the company’s growing customer base. In addition, Triple Point extended its Asia Pacific footprint with the acquisition of QMASTOR, the premier provider of mining software solutions, headquartered in Newcastle, Australia. 

Read more about Triple Point Commodity Management solutions.
roller coaster economyNews-grabbing headlines highlighting commodity price increases due to weather-related and other supply issues have completely shifted the dynamics of Commodity Management and broader procurement, sourcing and supply chain management activities.

According to advisory group Spend Matters, organizations are observing radical commodity price fluctuations of up to 40% which are having a massive impact on their P&Ls. However, despite this volatility and its impact, precious investments in technology solutions and skilled resources often go towards other areas of the business rather than being allocated towards efforts to control, mitigate and manage commodity risk. Companies that allocate little or nothing towards Commodity Management head down a very dangerous path towards declining returns and higher risk profiles.

A new white paper from Spend Matters, “Beyond Sourcing and Supply Chain: Commodity Management Solution Fundamentals,” explains that “now is the time for organizations to make the right set of investments in Commodity Management.” It outlines the business case for Commodity Management, including how to build a quantifiable argument to invest in the right team, processes and solutions to take action in the current environment. Read it now and learn how to prepare your organization to manage the dips, twists and turns of today’s roller coaster economy.

Sempra was an amazingly successful commodities trading organization in the 1990s and 2000s before forming a joint venture (being sold) with RBS in 2008.  At one point, Sempra had 44-straight profitable quarters.  I recently read a very interesting article about how newly-formed Freepoint Commodities, which launched its North American operations in March of 2011, is really a “restart” of Sempra.  David Messer, the former CEO of Sempra, is the CEO of Freepoint.  In addition, roughly two-thirds of Freepoint’s employees are former Sempra employees.

I particularly liked this quote by Mr. Messer: "We started trading in June and I think that's fairly remarkable to launch on March 1 and be trading 3 months later. I think that's testimony to the fact we've been able to reassemble a team that is highly experienced and has worked together. We're currently ahead of our plan."

I’ll add from a Triple Point perspective that’s it’s also important to choose the correct Commodity Management partner and solution.  Triple Point was able to implement Freepoint’s platform quickly to support its business requirements and also provide the robust functionality to support Freepoint’s rapid growth plans into additional commodities across the globe.

Enjoy,
Michael


The Commodity Management Blog has been closely following the top Commodity Management issues throughout the year. Not surprisingly, posts discussing Dodd-Frank top the list.  Below is a complete list of the 10 most popular posts over the past 12 months based on views and shares.  We thank you for following us and hope these posts have provided valuable tips on how to manage commodities smarter.


We have some really great things in store for 2012, so here’s to a year of fresh ideas for Commodity Management!

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Events

Procemin 10th International Mineral Processing Conference

October 15-18, 2013 | Chile

XXV Brazilian National Meeting of Mineral Treatment and Extractive Metallurgy (ENTMME)

October 20-24, 2013 | Brazil



Opinions expressed on this blog are those of its individual contributors, and do not necessarily reflect the views of Triple Point Technology, Inc.