May 10, 2013 | Jeff Burns
We recently returned from sponsoring Logichem Europe where over 250 supply chain planning professionals discussed top industry trends. A topic of particular interest this year was supply chain segmentation.
What is supply chain segmentation? It’s a way to have your physical supply chain support multiple, virtual supply chains—each focusing on a different segment of products or markets with unique production costs, distribution costs, and customer requirements.
For example, companies can use segmentation to have their low margin products follow the most cost-effective paths through the supply chain, isolate unpredictable customers into separately forecasted groups to improve overall accuracy, or give premium service only to their highly profitable customers.
That’s good news for an industry facing extreme volatility and price pressures.
If you were to group your company’s products into different categories having similar expected customer service levels, lead times, and packaging varieties, you’d find that each group places different demands on your supply chain and represents different levels of profitability to your company. So why not treat each group differently with product and service offerings tailored to each group’s unique needs?
Supply chain segmentation allows you to do this.
Mature segmentation strategies extend across several areas of your supply chain, involving differentiated customer replenishment programs, supplier replenishment programs, inventory policies, demand policies, allocation and order promising, and Sales & Operations Planning strategies. With segmentation, you can introduce more stability in your production, leverage more economical distribution, and minimize the impact of volatility.
It’s easy to see why segmentation was a main point of focus at the Logichem conference. At Triple Point, we understand the value of segmentation to our customers, which is why our Supply Chain Optimization solution supports such strategies. Contact us to find out how you can implement a segmentation strategy for your company and begin reducing the impact of today’s volatility.
May 03, 2013 | Briana Grabow
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.
April 16, 2013 | Michael Schwartz
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…
April 04, 2013 | Peter Cooperman
European energy markets continue to experience change that will prevent power and gas companies from putting their eggs in the same old baskets. Ongoing developments have exposed the shortcomings of legacy software applications that are no longer capable of effectively calculating risk or optimizing trading activity.
Commodity Now’s latest white paper, Managing the European Energy Equation, written by publisher Guy Isherwood, discusses the adversity that companies have encountered in Europe’s power and gas markets. Uncertainty has made trading in product isolation obsolete, and participants are challenged with managing multiple commodities while struggling to meet the demands of evolving regulations.
Read the full story and learn more about the opportunity that exists in the pan-European market for companies that partner with Triple Point Technology for an energy trading and risk management (ETRM) software solution to navigate newfound volatility and risk.
Triple Point’s Commodity XL™ offers the best path to success in Europe’s power and gas markets. It is an advanced ETRM system that provides real-time physical supply chain management, risk management, and optimization of energy trading strategies for multiple commodities, while capturing the information necessary to meet regulatory requirements.
Download the white paper
March 22, 2013 | Jeff Burns
Whatever you do, don’t collaborate with your supply chain planning peers. No need to share information about inventory levels, customer orders or transportation woes. And definitely don’t try to predict sales out into the future, because there’s just no evidence that it’s a worthwhile endeavor.
OK, I didn’t think you’d agree with that. If nothing else, the previous paragraph was an unexpected swim against the current of overwhelming support for doing the exact opposite. Of course you should be collaborating. Of course you need to share information upon which critical supply chain planning decisions are made. Of course you should be doing everything possible to plan out as far as it is practical with as much accuracy as possible. And of course you should be leveraging advanced planning and optimization technologies to help create highly profitable operating plans. Why? Because it’s your best defense against the supply chain planning risk and unpredictability that is here to stay.
A recent survey from Deloitte shows that global executives are increasingly concerned about the growing risks to their supply chains and costly negative impacts, such as margin erosion and inability to keep up with demand. Of the 600 executives surveyed, most converged on the need for a strong risk management strategy to mitigate the impact of ever-present disruptions. Yet, an alarming 45% of the surveyed executives said their supply chain risk management programs are only somewhat effective or not effective at all. And the number one reason why their supply chain risk management programs are not successful: “lack of acceptable cross-functional collaboration.”
Despite strong evidence from all corners of supply chain outlining the benefits of collaboration, including increased visibility, flexibility and control, many companies continue to struggle to achieve an effective level of collaboration across the enterprise. They continue to operate in an array of information silos, preventing the creation of a true picture of the current state and future outcome of the current supply chain operating plan. Look deeper into the Deloitte survey results and you’ll find that “current tools and limited adoption of advanced technologies are often constraining companies’ ability to understand and mitigate today’s evolving supply chain risks. Although many of the surveyed executives report using a wide range of tools to manage risk, only 36% use predictive modeling and less than one-third (29%) use risk sensing data, worst case scenario modeling, or business simulation—tools that can help drive more proactive management of supply chain risk.”
With many advancements in supply chain software over the last decade, it is surprising that companies continue to struggle in these areas. Triple Point’s Supply Chain Optimization solution has been helping process manufacturers achieve enterprise-wide collaboration enabling tactical and strategic supply chain planning for over twenty years.
March 14, 2013 | Michael Schwartz
Just a few years back, there were many articles discussing “Peak Oil” and whether the world had already passed the peak. A typical headline was one in Fortune Magazine in 2008 with a headline predicting a dramatic increase in oil prices – “Here comes $500 oil.”
At the recent HIS CERA Week, it was reported that “Peak Oil” was already a distant thought for most presenters, and that much of the talk was about growth in natural gas and oil from unconventional shale resources in the U.S.
According to the U.S. Energy Information Administration (EIA), crude oil production in the U.S. exceeded an average seven million barrels per day (bbl/d) in November and December of 2012, the highest volume since December 1992.
The International Energy Agency (IEA) predicts that the United States will overtake Saudi Arabia and Russia to become the world's leading oil producer by 2017.
The WSJ MarketBeat Blog notes we are only at the beginning. “U.S. tinkerers discovered a way to extract oil and gas from shale, the source rock for oil and gas that was previously deemed uneconomical. That has boosted U.S. production to levels not seen in two decades, and that’s only the beginning: shale recovery factors could improve, and vast shale formations in Argentina, China, Russia and other countries are yet to be tapped. If technology ever allows the industry to recover 70% of oil from conventional reservoirs and to double or triple the current recovery rate from unconventional resources, the world could almost quadruple the reserves of global liquids.”
In addition, Iraq passed a critical milestone last year by producing three million barrels a day of crude oil for the first time since before the Persian Gulf War, reaching a high of 3.4 million bbl/d in December. Given its access to vast reserves at low costs, Iraq could play a significant role in the growth of energy supply. Of course, in Iraq there is much geopolitical risk attached to supply.
Even with increased production, there was still not enough oil to meet demand in the beginning of 2013. The EIA estimates a 1.3 million bbl/d average draw-down in global oil stocks for January and February.
There are numerous uncertainties as we move forward including the rate of technology advancements, geopolitical risk in many energy rich nations, growth in demand as the world continues its economic recovery, etc. Perhaps the only certainty is continued volatility and the need for oil trading risk management software to manage the volatility.
As Jim Rogers, Chairman, President, and CEO of Duke Energy has been known to express in speeches, “Ben Franklin said there are two certainties in life: death and taxes. To that, I would add the price volatility of natural gas.”
The future of energy is going to be quite interesting!
March 07, 2013 | Peter Saridakis
Really, there is a National Cereal Day…
Who doesn’t love cereal? Sometimes it’s my three square meals for the day, and a midnight snack. The cereal aisle is my favorite destination at the supermarket, as I’m sure it is for many of you as well.
Supermarkets offer an assortment of cereals. There are the sugary and fruity cereals for the kids, and let’s face it, some adults too. And for the responsible adults, there are the organic, healthy, and high fiber cereals. The cereal industry is enormous and ever-changing due to the volatile nature of the commodities that are used. The primary ingredients of cereal consist of grains, sugar, cocoa, sweeteners, and other additives like vitamins and minerals.
The world agricultural markets have experienced volatility brought about by several factors including poor harvests, sustained demand, increased use of agricultural products for fuel, and possibly the increase in speculative trading. Consumer Products (CP) companies in particular have seen commodities become a much larger and more volatile part of their cost structure.
By implementing a fully integrated, scalable, end-to-end approach to commodity management, organizations improve real-time visibility into enterprise market risk and are able to move in and out of positions more quickly. This is why notable CP companies use Triple Point’s Commodity Management software. Learn More.
March 01, 2013 | Lauren LaFronz
Triple Point officially opened its Latin American headquarters in Rio de Janeiro this week with a special reception hosting Vale, NORSUL, and other leading companies that rely on Triple Point’s Commodity Management solutions.
The new office enables Triple Point to service its rapidly growing customer base throughout the region. Latin America has always been an important market to Triple Point, with Petrobras becoming a customer back in 2000.
The Latin American economy is very commodity-driven because of rich natural resources including coffee, sugar, oil, and iron ore. The Brazilian economy in particular is the largest in the region, and the country is also one of the world’s largest commodity exporters.
In recent years, the commodity markets have become very volatile, with companies struggling to mitigate exposure to market swings. Because of these conditions, effective risk management is more important than ever, and Triple Point has seen interest in its commodity trading and risk management (CTRM) solutions increase significantly throughout Latin America.
The energy, mining, agriculture, and consumer products (CP) industries within Latin America represent big opportunities for Triple Point because Triple Point’s solutions provide extensive functionality that addresses the unique challenges of each industry. Learn more.
February 21, 2013 | Peter Cooperman
I would be hard-pressed to cite a manufacturing process that didn’t inevitably lead to the co-manufacture of some form of waste. Throughout history, successful companies have developed creative ways of breathing new life into those by-products. When Henry Ford, of Ford Motor Company, began his assembly line production of Model T’s; he discovered that scrap wood pieces could be used to manufacture charcoal. That discovery not only repurposed the wood but allowed Ford to earn additional profit and ultimately spinoff the business. Today, Kingsford Products Company remains the leading U.S. charcoal manufacturer.
In the same vein, Natural Gas Liquids (NGLs) have proven to be valuable by-products of crude oil and natural gas. The raw mix (Y-Grade) gas that remains as part of the refining process does not have a price index and is considered waste, but the individual hydrocarbons comprising the mix are profitable. The process of fractionation yields ethane, propane, isobutane, butane, and pentane which are priced and actively traded throughout the world. They are considered key components of chemical and plastic manufacture, and the heavier hydrocarbons are used as fuel.
The boom of shale oil and gas production in the United States has left the country with a surplus of NGLs. Asked a decade ago; no analyst would have surmised that the U.S. would be poised for becoming the world’s largest exporter of any fossil fuel, but an increase in global demand has set the stage for it to happen. The energy market is always changing and remains highly unpredictable.
The demand for NGLs is growing and now is the time to develop a strategy to profit from market movements. Companies seeking to enter the NGLs arena need to be aware of the many factors affecting the process of isolating the individual components of Y-Grade, potential yields, and ultimately bringing the end products to market.
Triple Point Technology’s solution offers a comprehensive Energy Trading and Risk Management (ETRM) system with the unique capability of providing physical supply chain management, risk management, and optimization of energy trading strategies on a single platform. Commodity XL provides companies with the tools necessary to interpret complex data that is paramount to understanding the complicated relationships that exist in today’s NGLs market. Click here to learn more about Triple Point’s software.
February 13, 2013 | Jeff Burns
As you read this, Triple Point headquarters is emerging from the second of two headline-grabbing storms to wreak havoc on the northeastern United States. Winter storm Nemo dumped 40 inches of snow on New England, cutting power to 650,000 customers across eight states and paralyzing air, rail and road networks. And while recovery should not take too long this time, that was not the case with Hurricane Sandy last October whose 110 mph winds caused $74 billion in damages in a swath from the Caribbean to Cape Cod.
If your job is managing the distribution of materials across a supply chain, storms like these mean big headaches.
When transportation lines are cut, product does not move. Customer orders are delayed or canceled. Raw materials are not delivered. Production assets are offline. You must respond with supply chain planning and scheduling revisions that somehow accommodate your customers while avoiding impact to margins.
The complexity of revising integrated supply chain production and distribution schedules cannot be overstated. Maintaining balance during plan revisions is virtually impossible without accurate, timely data from across your enterprise. Creating and evaluating feasible recovery scenarios is equally impossible if attempted using inadequate planning technologies. Simply put, you need supply chain software that gives you clearly-defined options and lets you make planning decisions that help you quickly get your supply chain back on track.
When 100-year storms start occurring every six months, supply chain professionals trade their spreadsheets for advanced supply chain planning solutions that deliver enterprise-wide visibility and enable optimal plan revision. Triple Point’s Supply Chain Optimization solution lets you maintain optimized plans and schedules in the face of such disruptions. Learn more.