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.
Since 2010 the coking coal industry, led by BHP Billiton, has been moving towards shorter term market based pricing, breaking with the tradition of annual contacts and mutually agreed prices. This reflects commitment from the industry to achieve current market prices.  In April this year, BHP told Reuters that it expected two-thirds of the global coking coal market to adopt spot and short-term pricing mechanisms by the end of 2012. On the back of this, trading platform globalCOAL has recently launched trading contracts for coking coal.

Triple Point has supported this move by adding short-term pricing contracts to their QMASTOR Pit to Port solution. This new functionality has already been adopted at Anglo American; many other clients are set to add it soon.

Pit to Port’s Contract Management module has been enhanced to allow both quarterly and monthly pricing contracts. These changes have been accompanied by additional functionality to report and manage contract information, giving organisations an enhanced understanding of their contracted positions and the ability to make more profitable decisions.

Read more about QMASTOR’s Pit to Port solution.

As history has shown us, getting credit risk wrong can result in reputational damage and ultimately financial ruin. Organizations that want to succeed today must make credit an enterprise level concern. 

I recently talked to Fred Pacione, Director of Credit Risk and Marketing Treasury at Nexen Inc. about how they manage credit risk and the central role that Triple Point plays in this. Nexen takes an automated approach which crucially has the full support of senior management.  Their credit risk strategy has four key elements:

  • Holistic counterparty assessment
  • Accurate view of exposure
  • Credit risk prevention measures
  • Credit risk reporting

A credit risk strategy must deliver these four elements and have the backing of management. Anything less could be perceived by shareholders as irresponsible. In short, organizations must abandon their spreadsheets and rudimentary systems and put in place a sophisticated, automated credit risk system. To learn more read the full article

Are you looking for greater visibility into your supply chain? Do you dream of a "single version of the truth" across mining operations, marketing, logistics, and finance, but are not sure how to make it a reality?

Triple Point recently hosted a webinar with Exxaro’s Melanie Steyn on how they gained a single view of mining operations, saved money and increased productivity with QMASTOR’s mining supply chain solution. Triple Point experts also provided deep insight into how to simplify logistics, meet targets and optimize production.

The webinar highlighted valuable tips on how to reduce penalties and operational risk while making supply chains more productive and improving efficiency. Key takeaways included:

  • How to improve quality and grade control while containing costs
  • Tips on optimizing resource allocation and strengthening internal controls
  • Why supply chain visibility is essential to gain an up-to-the-minute view of commercial position
  • How to track and forecast bulk commodity movements and stockpiling
  • Why it is NOT an Excel world anymore

If you missed the live event, don’t worry – you can view the webinar on-demand here.

You can also read an interview with Exxaro about their implementation of QMASTOR’s Pit to Port solution and the benefits it has brought them. 

Commodity volatility combined with soaring commodity prices make predicting and maintaining margin challenging for Food and Beverage companies. In a recent article in We Know Commodities, Mark van Erkelens, an executive in Accenture’s SAP Supply Chain Solutions Group, shared four tips for managing commodity volatility in the food & beverage industry.



1. Maintain margin despite growing volatility.
In order to ensure a consistent stock of raw materials at the best price, utilize tools that can provide enhanced insight into commodity pricing trends.

2. Integrate financial and physical markets.
Research from Accenture’s Institute for High Performance shows that market leaders take an end-to-end approach to the sourcing, selling, trading, and logistics processing of commodities.  Companies that integrate financial and physical markets improve decision making, reduce operational risk, and accelerate their ability to move in and out of positions.

3. Identify market opportunities before competitors.
Don’t be the last to know. Utilize advanced tools for market simulation and planning, combined with predictive analytics, to identify market opportunities before competitors. These tools will also allow you to forecast results more accurately and develop more effective reporting mechanisms in general.

4. Optimize trading agility and integrate sourcing needs.
 Today’s market leaders use advanced simulation technologies to model demand forecasts and make refined trading decisions based on forecasted as well as unanticipated needs. Look to integrate the needs of the sourcing units – from logistics through invoicing and financial processes.

Mark concludes the article by saying, concludes the article by saying, “Integrated and optimized supply and commercial planning capabilities are critical to driving revenue and profit maximization – and key  to high performance – especially in our volatile global environment. By implementing a fully integrated, scalable, end-to-end approach to commodity management, organizations improve real-time visibility into enterprise market position and are able to move in and out of positions more swiftly.”  Learn more about Triple Point’s Food and Beverage Commodity Procurement SolutionCommodity XL.

Steve Maxwell recently presented at Dry Cargo’s Bulk Ports, Terminals and Logistics 2012 Conference in Amsterdam. It was a lively and interactive session that demonstrated how organizations can optimize decision making and deliver substantial cost savings by integrating terminal operations on a common technology platform.

With numerous partners and resources the bulk terminal supply chain is very complex. Consumers, suppliers, vessel owners/charterers and agents, maintenance planners and transportation providers all need to record and exchange large amounts of data while managing their unique business processes. Despite these challenges, many terminal organizations are still attempting to manage their supply chain with inadequate spreadsheets that cause process inefficiencies, errors, and poor decision making that lead to lost profits and operational risk.

The only way to fully mitigate these risks is to implement integrated terminal management systems which bring together information systems, business processes and people to provide end-to-end visibility into operations. Once up and running, key benefits of such systems include:

  • Resource optimization
  • Increased terminal throughput
  • Reduced demurrage and transportation penalties
  • Commodity quality management
  • Visibility through real time accurate information
  • Improved information workflow and stakeholder self service
  • Reduced operational security and compliance risk
  • One version of the truth across the supply chain

Integrated bulk terminal management is rapidly beng adopted by the industry as best practice. In Accenture’s report on Transformation to Enable High Performance in Ports they stated, “In this battle for a growing but increasingly demanding market, the winners will be ports that can manage terminal performance holistically.”

Triple Point’s QMASTOR PortVu solution is an award integrated bulk terminal management system that is being used by organizations such as Dalrymple Bay Coal Terminal, Newcastle Coal Infrastructure Group and Westshore. The solution manages the complexities of stockyards, inter-modal transportation, and vessels while ensuring equipment is scheduled and utilized efficiently. PortVu integrates terminal operations with suppliers, customers, transport providers, agents, laboratories, and other partners through the use of a common platform.

Read more about Triple Point’s QMASTOR PortVu solution.

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!

With J.P. Morgan’s recent $2 billion loss, financial risk is once again making headlines. It doesn’t look like this loss is going to cause systemic failure, but it serves as a prudent reminder that strong credit risk management systems and   practices are vital to surviving today’s risky waters.   

 In a recent article in We Know Commodities, Dana Docherty and Amanda Lohec, Directors at Opportune, warn that “All too often, spreadsheets that are intended to be a stopgap measure become comfortable and are accepted as a long-term solution. Replacing those spreadsheets with Credit Management and Reporting (CMR) systems is critical to developing strong credit risk management capabilities."  In the article, they also share some important lessons learned from credit risk and reporting system implementations.  The following are some lessons learned to ease the transition:

1. Understand your data environment

2. Review and document your current credit processes

3. Consider a modular approach

4. Carefully consider product enhancements

5. Manage your common data

6. Enforce good business processes


Beyond protecting you from losses, credit risk systems can help you better understand traders' profitability – neither of which you can do with spreadsheets. Read more about Triple Point’s award-winning credit risk solution, Commodity XL for Credit Risk™.


Oil-Trading-SoftwareA combination of persistently low margins and high volatility can spell bad news for refining operations, causing intraday swings in oil prices exceeding their margins. According to an article recently published in Global Technology Forum, this situation is driving greater integration between refinery operations and trading activities within oil companies. It’s no longer good enough to be buying or selling to meet the needs of the refinery – supply traders and marketing personnel are being asked to use their market knowledge to make smarter trading decisions.

According to Viren Doshi, senior vice president, Booz & Co., a more trading-oriented approach has been most prevalent in northwest Europe, the Mediterranean, and the US Gulf Coast. Companies in these regions have recently had to be more flexible to survive low margins and leverage high price volatility in their markets. Independent refineries in particular have been bullish on this approach because of their less complex operations.

Software solutions that can minimize costs and maximize refinery margins by optimizing the entire supply and trading chain have been key to making trading integration easier for refiners. These solutions have the ability to process refinery plans and forecast demand and production information upon which the supply and marketing groups can take action. They also enable plan changes to be immediately visible to the trading group for improved efficiency and productivity. To learn more, read the full article.

Are you in full compliance with AMIRA P754? The importance of coherent material balance results has long been recognized by mining and metallurgical companies. Due to recent accounting scandals and the resulting tightening corporate governance, companies are becoming increasingly concerned with how the reported numbers are obtained and how much accuracy can be attributed to them.

As a result, The AMIRA P754 project was launched in 2004 to develop a rigorous set of metal accounting guidelines for the mining and metallurgical industres. The guidelines stress the importance of state-of-the-art metal accounting systems, such as Algosys Metallurgical Accountant™, and warn that companies using spreadsheets for metallurgical accounting lack auditability and data accuracy and are not in compliance with AMIRA P754.

The Canadian Institute of Mining, Metallurgy and Petroleum (CIM) recently published an article on Implementing the Ten Best Practices of Metal Accounting at the Strathcona Mill.  It is an excellent case study on how Algosys Metallurgical Accountant helped Xstrata meet all AMIRA P754 guidelines – including the ten principles of best metallurgical accounting practices (BMAP).  It also explains how Xstrata was able to eliminate spreadsheets, gain visibility into key plant performance indicators, and optimize performance and recovery.

You can read the full article here. I hope it provides some valuable insight into AMIRA P754 and fresh ideas on how to automate, standardize, and accelerate your metallurgical accounting cycle.

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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.