April 24, 2012 | Lauren LaFronz
Mining companies are no strangers to advanced technology – geological models, dispatch, and plant control systems offer sophisticated databases and solutions for asset optimization. But there’s one exception: supply chain management
for tracking assets from mine to customer.
Mining companies often rely on a patchwork of generic spreadsheets to manage the tonnage, quality, and value of their coal or mineral supply chains. This is a very dangerous practice – spreadsheets are not sophisticated enough for handling complex operational processes such as planning, material tracking, and grade control – however, they are often relied upon to do just that.
In addition, studies show that as many as 94% of spreadsheets contain errors, which often go undetected. These errors can spread throughout key corporate processes that control hundreds of millions of dollars of inventory, putting the entire firm at significant operational risk.
To learn more, read “The Hidden Threat,”
an article recently published in Mining Magazine. Authored by Steve Maxwell, Triple Point’s resident mining supply chain expert, the piece details the dangers of relying on spreadsheets for mining supply chain management, making the case for advanced supply chain management systems. Read it now.
April 20, 2012 | Lauren LaFronz
According 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.
April 19, 2012 | Michel Zadoroznyj
In our circles, when we talk about the Dodd-Frank Act, we tend to gravitate our conversations to Title VII – Wall Street Transparency & Accountability. It is, of course, the most hotly disputed, high profile part of the legislation. So, it’s easy to forget some of the other sections of DFA that may concern corporations. One such section is 1502.
Section 1502 – Conflict Minerals
This section requires a disclosure that on the surface seems fairly well intended. Since Congress has determined that “the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo and adjoining countries is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence, and contributing to an emergency humanitarian situation”, corporations will be required to disclose their sources of “Conflict Minerals”. Conflict Minerals include columbite-tantalite (coltan, niobium, and tantalum), cassiterite (tin), gold and wolframite (tungsten) and their derivatives. The State Department can add new minerals when they determine it is necessary.
Who will be impacted?
The impact will be broad, and will encompass all publicly traded companies that source the listed minerals. If you think about it, that covers quite a cross-section of industries: automotive, communications, electronics – you name it. By the SEC’s own estimates, at least 6,000 companies will be impacted. They will be required to disclose in their 10-K, 20-F and 40-F filings the use of “Conflict Minerals” in their products. Even if the source of the material cannot be established, that will also require disclosure. Lacking a de minimis provision in the law, any sourced quantity will necessitate disclosure. The law also calls for due diligence, although that has not been entirely defined. In all likelihood the model of due diligence proposed by Organization for Economic Co-operation and Development (OECD), would serve as a template.
Court of Public Opinion
There are problems with distilling the complex problems of the Democratic Republic of the Congo to a sourcing disclosure and expecting it to be the solution. There are legitimate tribal mining operations that are likely to suffer as a result of this requirement. Regions of the DRC are not in conflict, but they are already witnessing the impact of the proposed rulemaking. According to a recent New York Times article, many mining operations in Eastern Congo have been damped or halted completely. And so the SEC struggles – delaying its final rulemaking yet again. With no established SEC guidelines, I would anticipate more mining operations to close. The concern among manufacturers is also heightened, and it is not just a cost of compliance issue. The fear is that the public’s perception will drive investment or product purchase decisions based solely on a DRC tag or a lack of traceability. Keep in mind, the legislation does not make it illegal to source Conflict Minerals, it just requires the disclosure of that information. I’m all for doing the right thing here, but I’m just not entirely convinced that this is the right thing. Not for the people of the DRC or the corporate world.
April 13, 2012 | Kate Lothian
I recently talked to Exxaro, South Africa’s second largest coal producer, about the challenges affecting the industry today and how they are transforming their business to meet the growing global demand for coal. A major part of their transformation has been to reengineer the supply chain so that they can produce substantially more coal and generate more revenue.
During our conversation, Melanie Steyn, Exxaro’s Coal Export Manager offered some fascinating insight into the risks posed by manual supply chains. Using spreadsheets to manage complex supply chains can result in inefficient production, financial penalties, high transportation costs and demurrage.
Melanie goes on to talk about their implementation of QMASTOR’s Pit to Port solution and the benefits it has brought Exxaro which include increased productivity, significantly reduced costs and a centralized view across all mines, stockpiles and terminals. Additionally, QMASTOR’s seamless integration with SAP EEC6 has enhanced efficiency throughout the supply chain.
You can read the interview here. I hope you find it useful and gain some tips on how to improve your supply chain.
April 10, 2012 | Lauren LaFronz
News-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
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.
March 27, 2012 | Ann Surratt
Are you struggling with disparate commodity trading systems, overuse of manual processes and spreadsheets, and underuse of third party solutions? Have dramatic changes to the energy markets outpaced your technology capabilities?
If you know you need to upgrade your Energy Trading and Risk Management (ETRM) system, but are overwhelmed by the idea of ETRM vendor evaluation, ETRM system selection, and ETRM implementation, you are not alone. Structure’s Baris Ertan recently wrote an article on how to determine ETRM requirements. He explains that if you ensure the right ETRM requirements, “you’ll be rewarded with a system that meets your needs and prepares the organization to take advantage of the opportunities afforded by today’s complex and ever-changing energy markets.”
A few tips that I found particularly useful include:
1. Create a process review that includes an “as-is” baseline and “to-be” vision. Market demand, price volatility, and derivatives legislation continue to drive change in the energy markets. He smartly advises to incorporate planned growth in commodities, instrument types, physical assets, geographies, markets, currencies, etc.
2. Engage front, middle, and back offices in requirements gathering. The best solutions for staying ahead of the curve in today’s complex markets are end-to-end solutions. It is critical to involve IT, compliance, legal, procurement, and senior management in this strategic initiative.
3. Consider integration strategy early. Does a best-of-breed or a single system approach best fit your resources and capabilities? Baris explains that “an early investment in time on this process pays dividends. It is a key input into a requirements matrix that feeds vendor evaluation, implementation planning and estimations, solution design, testing, and ultimately deployment.”
4. Conduct scenario-based demonstrations. Your business requirements are unique. Baris advises, “it’s crucial to translate business requirements into detailed business scenarios that each vendor can model and use to showcase its solution.” I couldn’t agree more.
Determining your ETRM requirements is vital in conducting a rigorous vendor evaluation that renders the best functional and technical fit for your organization. A company can’t underestimate the importance of doing it right – taking shortcuts or rushing the process can have severe long-term financial and operational ramifications that are difficult if not impossible to rectify.
For more ideas on how to determine ETRM requirements, view on-demand Triple Point’s recent Commodity Trading, Procurement, and Risk 101 webinar. It highlights the latest must-have requirements for ETRM success.
March 23, 2012 | Kate Lothian
The South African coal industry received a huge boost last month when President Jacob Zuma used his State of the Union address to back critical infrastructure projects in South Africa. He announced a much needed investment of R200bn ($26bn) to help upgrade the capacity of the state owned rail network, Transnet, which currently limits the amount of coal South Africa is able to export.
Transnet is crucial to the future of the South African coal industry. Today, the volume that the rail network can carry is below the export capacity of their largest coal terminal (Richards Bay). Transnet have started upgrading the network which has brought improvements but also some temporary fluctuations in capacity. This boost from President Zuma could not have come at a better time.
South Africa is the world’s fifth largest coal exporting country. Once complete, the upgrades in the rail network will mean that they can export the entire 91m ton capacity of the Richards Bay Coal Terminal. The industry is already starting to plan how they can expand their export capacity to at least 100 million tons.
Exxaro, South Africa’s second largest coal producer uses Triple Point’s QMASTOR supply chain management systems to manage the tonnage, quality and value of coal and minerals from their mines to the point of export, import or consumption.
March 21, 2012 | Lauren LaFronz
If your answer to the above question is anything less than ‘very,’ your company’s future may be at risk.
In the turbulent seas of the shipping industry, understanding the true market value of your fleet is the difference between sinking and swimming. Performing frequent mark-to-market (MTM) valuations is an integral part of doing business. However, due to the volatile nature of the industry, the complexity of calculating freight rates, and flaws inherent in popular valuation methods and tools, companies often end up with inaccurate numbers. This provides an erroneous picture of financial standing that can result in lost profits, faulty decision-making, and ultimately the demise of an entire business.
To understand the challenges associated with calculating accurate MTM valuations and how to address them, I encourage you to read a new article in The Baltic by Javier Navarro, Triple Point’s Freight Risk Solutions Manager. It offers a detailed look into this subject that is intended to help companies gain a competitive edge and stay afloat in the rough waters of the cutthroat shipping industry. Read it now
March 09, 2012 | Ann Surratt
Is your commodity trading and risk management system adequate for the “new normal?" New regulations in the US and Europe, extreme price volatility, capital constraints and shorter cycle times demand new risk management strategies.
Triple Point recently hosted a webinar with Accenture’s commodity trading and risk management expert, Alex Chandy, on the latest trading and risk management best practices. Triple Point’s own risk expert, Greg Leck, also discussed how Triple Point’s leading CTRM solution delivers up-to-the-minute risk intelligence to manage portfolio risk exposure, set limits, and control risk.
The webinar highlighted valuable tips on how to deal with today’s market chaos and uncertain regulatory environment. Key takeaways included:
1. How to optimize risk and create opportunity in the face of
high frequency trading
2. Tips on how to avoid losses and identify hidden risk with
broader scenario analysis
3. A clear understanding of the Commodity Super Cycle and
what it means to your business
4. Why it is NOT and Excel world anymore
If you missed the live event, don’t worry – we’ve got you covered. You can view the webinar on-demand here. Enjoy!
February 14, 2012 | Lauren LaFronz
The 2,000 page Dodd-Frank Act is the US government’s response to the financial crisis. While it was signed into law well over a year ago, the finer points are still being negotiated, clarified by lawyers, and challenged by Wall Street players.
For energy and commodity firms operating in Europe, this is a cautionary tale – the European Union (EU) is introducing an alphabet soup of directives and legislation affecting the financial and commodity markets including the Regulation of Energy Market Integrity and Transparency (REMIT), the Market Abuse Directive (MAD), the second Market in Financial Instruments Directive (MiFID II), the European Market Infrastructure Regulation (EMIR), and the Capital Requirements Directive (CRD).
The EU’s objective is to have all legislation in force by the end of 2013. The exact provisions aren’t fully baked, but it’s clear that all companies trading over-the-counter derivatives will be impacted across the whole value chain from front office sales through to back office reporting and all points in between.
Not sure how to prepare your company for the impending regulatory avalanche? Mike Zadoroznyj, Triple Point’s Vice President, Treasury and Regulatory Compliance, has written an article for FX-MM magazine about what you need to do in order to ensure that your systems are compliant. Read it now