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The Need for Commodity Analytics in Commodity Management Software

Commodity Management

The Need for Commodity Analytics in Commodity Management Software

The management of commodities and the risks associated with this activity have evolved since the introduction of Energy Trading and Risk Management (ETRM) software in the 1990s. Over time, the type and quantity of data to be managed changed and these solutions later evolved to Commodity Trading and Risk Management (CTRM) software in the mid-2000s that grew in scope to include support for commodities other than energy. In addition to support for additional commodity types, ETRM and CTRM software has grown further into the supply chain and the functional footprint of these systems has dramatically increased. Now, we are seeing another generational shift from what were primarily transaction-based systems to solutions that provide sophisticated, real-time, analytics along with transaction management.

Commodity Management is a Big Data Business

Inherently, the commodities industry has always been a big data business. Physical trades that are hedged with financial derivatives create thousands of individual data points. And each of those data points represent multiple decisions to be made and perhaps reconsidered before the trade is eventually closed. Prices move, markets change, and regulations are updated. For example, as a market data provider, GlobalView is constantly adding new data sources to meet the needs of commodity market participants. Today’s focus on analytics is driven by the need for more data.

All of this data drives complexity in decision making. Those companies who are best equipped to leverage the data available to them to make the best decisions will gain a competitive advantage. It’s a whole new world. No longer is the typical CTRM software system adequate for companies exposed to commodity market risk. While the ability to capture the data that surrounds each transaction or engagement is still required in CTRM software, that functionality alone is not enough. As margins tighten and conditions get tougher, commodities companies need systems that do more.

A Generational Shift from Data Capture to Data Analytics

To remain competitive, today’s commodities companies need next-generation systems that support real-time decision making to move beyond data capture to data analytics. The ability to analyze information to create predictive models allows firms to develop accurate, repeatable formulas that take into account market conditions to identify optimal scenarios. Using advanced visualization techniques coupled with user-controlled, predictive analytics, commodities companies can optimize operations.

Commodities companies can no longer afford to wait days and weeks to understand market changes, analyze the alternatives, and make decisions. Instead, all business users need the power to analyze data the way they want. The solution that will enable real-time decision making requires two components: the right technology to handle the large volume of data generated by the commodities industry and built-in commodity specific intelligence to analyze the data. In addition, the most useful analytics solutions will enable business users to start using the solution immediately without an extended and costly implementation project.

Today’s Next-Generation Commodity Management Solution is Smart Commodity Management

Smart Commodity Management includes Commodity Analytics Cloud, an advanced data aggregation and analytics tool, and InSight CM, an integrated system for managing commodity transactions end-to-end. These two solutions together provide the analytical and operational solutions that commodities companies need to manage in today’s complex and volatile markets.

Analytics are the future of commodity management. Commodities companies need to look at advanced analytics solutions to ensure future success. Geared specifically for commodities companies in the agriculture, manufacturing, energy, and metals industries, Commodity Analytics Cloud provides traders, risk managers, analysts, supply chain/logistics managers, IT specialists, back office personnel, and executives with previously unavailable insights into key business areas.

Commodity Analytics Cloud brings together data from multiple internal and external sources including ETRM, CTRM, ERP, CRM, spreadsheets, and market data, including GlobalView’s MarketView data, which is available in a special bundled package price.

Eka Software Solutions is a global leader in providing digital commodity management solutions, driven by cloud, blockchain, machine learning and analytics.

To talk to Eka experts please write to info@eka1.com

commodities

5 Business Issues Facing Agricultural Commodities Companies

Let’s learn more about 5 frequently asked questions on common issues that affect not only agri-commodities companies but span almost all commodities: managing complex supply chains, over-use of spreadsheets, growing amounts of data, analytics, and mobility.

1) Is there a better way to solve critical business problems than relying on multiple systems and spreadsheets?

Most commodities companies have multiple software systems in place to manage commodity trading, risk, procurement, and supply chains. This could be due to an accumulation of systems from mergers and acquisitions, especially in agriculture as many of the large ags traders are looking to gain more control over their supply chains by expanding their global footprint.

They may also have a separate solution for each product, department, or geographic region. However, when data is kept in multiple siloed systems, companies often turn to spreadsheets to connect the dots. Manually entering data into excel is not timely, accurate, or auditable, and it forces companies to base critical decisions on the hope that an individual didn’t make any errors. Not to mention it can be expensive, like when an employee at Deutsche Bank reportedly sent a hedge fund client $6 billion on accident due to a ‘fat-finger’ mistake.

Luckily the company was able to recover the money, but these types of errors can be easily avoided. Rather than take the risk of costing your company millions, or billions, of dollars, commodities companies should adopt an integrated solution that covers the entire value chain and allows users to focus on data analysis instead of data collection. By aggregating and analyzing data all in one system, users can optimize decision making and gain a competitive advantage.

2) How can we get more analytics and reporting from our existing systems?

Commodities companies need to be able to perform predictive analytics in addition to slicing and dicing their data. In order to make better business decisions in today’s complex and volatile markets, analytics need to be in the hands of business users, not the domain of IT and specialists. Using an advanced analytics tool along with an existing solution, such as CTRM software, ERP, or other transaction systems, allows you to bring together all of your data from different sources, discover new insights, and investigate hidden risks faster.

3) Is there a Business Intelligence tool specific to the commodities markets?

Generic business intelligence (BI) tools typically require too much customization to be useful for commodity-specific issues. It can be very costly, both in dollars and time, to add all the functionality needed to manage commodities to a generic system, and in the end, you will probably still need to use another system to handle certain tasks.

There are solutions built specifically for the commodities markets that agriculture, energy, metals, and manufacturing companies should consider instead of a generic BI tool. This will enable them to get the relevant information they need to solve the most important business issues without having to hunt down the answers from separate departments or solutions.

4) How can we better understand and identify commodity risk and opportunities across the supply chain?

Having visual representations of your business makes it much easier to recognize risks and opportunities. For an agriculture company, having a transparent view from farmer to stockyard to processor to producer, all the way to the end-user, will allow you to make the best decisions for buying, transporting, storing, and selling commodities. For other commodity trading companies, it is critical to be able to view the entire transaction life cycle, from trading, risk management, and processing, to scheduling, logistics, accounting, and settlement. Using sophisticated visualization tools to get an accurate view across an entire deal lifecycle, users can identify commodity risk and exposures as well as gain insights into opportunities to improve efficiencies and profit margins.

5) Are there CTRM systems built for mobile?

As more people are conducting business on the go, traveling to customer or supplier sites, or working from a remote location, it is no longer acceptable to have to wait until you are in the office to access data and make decisions. To get the most value out of a CTRM software solution it needs to have all the functionality of a desktop system built in.

Traders, risk managers, and executives can maximize productivity with the ability to perform key functions anytime, anywhere. With mobile apps, traders can enter deals and hedge effectively, even while out of the office. Risk managers can manage risk across the organization and executives can monitor key performance indicators at any time. The ability to react quickly to new deal information and communicate this information to the relevant people in an organization rapidly, accurately, and conveniently, provides companies with a competitive advantage. Using mobile apps eliminates the need for multiple follow-up emails and telephone communications that can be inaccurate and delay contract settlement.

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Eka Software Solutions is a global leader in providing digital commodity management solutions, driven by cloud, blockchain, machine learning and analytics.

To talk to Eka experts please write to info@eka1.com

procurement

4 Procurement Analysis Issues Facing Manufacturing Companies

The procurement process at manufacturing companies such as consumer products (CP), food and beverage, and industrial can be very complex. It involves the sourcing of hundreds, if not thousands, of commodities and raw material ingredients from many different suppliers worldwide. Budgets, standards-setting, and forecasting need to be completed up to 12-18 months in advance. Often there are several systems in place to manage this process including ERP, MRP, and siloed spreadsheets, making it challenging to track coverage and spending.

Let’s explore 4 common issues in procurement as well as the business benefits of implementing an advanced analytics solution built specifically for managing the procurement process in manufacturing companies.

Issue #1: Managing commodity price risk

Business Challenges

Companies that are procuring commodities, raw materials, energy, or packaging to produce finished goods are exposed to increasingly volatile commodity prices. With market prices constantly changing, it is difficult for buyers to plan and budget, and is impossible to know the future spend for any given commodity. Often procurement groups are required to budget and forecast costs for thousands of items at a time, for months or years in advance. Without a commodity procurement system in place, this is a time consuming, manual process and there is no way to get a comprehensive view of price risk.

The Solution

Manufacturing companies need a system that automates and consolidates procurement data into one central location that allows you to track, monitor, and manage commodity price risk. The solution should integrate market price curves with data from ERP, MRP, accounting, spreadsheets, and other systems to provide accurate forecasting and budgeting capabilities.

Business Benefits

Procurement solution leverages predictive analytics to react to the market faster and gain a competitive advantage. The solution enables business users to view real-time coverage as well as the plan and maintain coverage within corporate governance policies. Users can also create additional insights that address specific questions without the help of IT, leading to better, faster decision making.

Issue #2: Lack of real-time information

Business Challenges

It is difficult for manufacturers to get true visibility into their exposures and risk when data is being stored in multiple systems. Coverage and pricing are usually managed in individual buyers’ spreadsheets and is time-consuming to manually combine the impact of physicals, futures, and FX.

The Solution

Manufacturers need a solution that manages planning, coverage, financial hedges, and risk in a single platform. They need to be able to manage cost models, consolidate exposure, have integrated derivatives and FX modules, and run complex forecasting scenarios.

Business Benefits

Procurement solution allows you to uncover hidden risks, make better, more informed decisions, and promptly take corrective actions. With the ability to run advanced simulations on market changes, coverage, spend, and variance, you can better evaluate how projected changes will affect the bottom line, as well as predict the impact to coverage before taking action.

Issue #3: The “spread out” spreadsheet

Business Challenges

It is widely known that spreadsheets are prone to manual errors and significantly increase operational work, yet most manufacturing firms still use a large number of custom spreadsheets to manage commodity risk and procurement. It can take weeks of effort to consolidate plans, monitor rates, and check for anomalies every time new forecasts come in.

Additionally, spreadsheet usage in procurement creates a lot of risk to the business due to the inevitable lack of data integration, auditability, and process controls. They provide no history of why changes were made and are dependent on the individuals who own the spreadsheets and write their own macros. This makes it very challenging to consolidate information for accurate forecasting and planning while also keeping the company’s data secure.

The Solution

These companies require a solution that maintains data in a structured form with the ability to trace and audit every transaction within the system. Role-based access should be set up as well as alerts, warnings, and exception tracking to highlight discrepancies in real-time. Workflows in the system will help create more process efficiencies and increased collaboration.

Business Benefits

Procurement Analysis solution enables procurement teams to reduce the time spent on operational tasks by up to 50%. This frees up valuable time to focus more on business strategy instead of collecting data and preparing reports. Updated volume forecasts can be accessed on-demand, rather than having to wait for a monthly or quarterly update, enabling teams to take corrective actions immediately.

Issue #4: No standards for cost models

Business Challenges

Manufacturers that have multiple business units within the procurement department usually do not have standardized cost models across buyers. Individual buyers will maintain their own spreadsheets, making it impossible to derive any insights or analysis. Because of the sheer volume and complexity of the models, maintaining and updating them takes a significant amount of time. Even with this manual effort, spreadsheets do not provide any visibility on the secondary cost components that make up total costs. These cost components may have a huge impact on spend and play a key role when negotiating contracts with suppliers.

The Solution

These companies need a flexible cost model framework that makes it easy to standardize and capture information in a structured manner to enable deeper analysis. The system should automatically update the components of each cost model and take minimal effort to maintain.

Business Benefits

Procurement solution allows you to establish organization-wide standards to enable the use of cost models to set budgets, learn individual cost contributors, and make automatic corrections to coverage. It also provides the ability to analyze how individual components of a cost model have performed relative to each other or to the market.

Start making the most profitable business decisions

Today’s modern manufacturing companies are benefiting from advanced analytics software. By integrating all of your procurement data and performing real-time analysis, you can start making the most profitable, fact-based business decisions.

Eka Software Solutions is a global leader in providing digital commodity management solutions, driven by cloud, blockchain, machine learning and analytics.

To talk to Eka experts please write to info@eka1.com