In the past few months, I've been to half a dozen or so different procurement events where the topic of market and commodity intelligence has surfaced in multiple presentations. It would seem from listening into these lectures as well as the hallway conversation in between sessions that companies are more interested than ever in exploring the potential to integrate market and commodity intelligence into both their immediate sourcing strategy and long-term planning efforts. There are a few reasons I see why companies are finally willing to make the investment in outsourced market intelligence services and financial and commodity market forecasting insights. In no particular order:
- Market and commodity intelligence has become an acceptable line item to budget for within the Fortune 1000. Whereas budgets did not exist five years ago in this area, the commodity market boom/bust cycle of the past 36 months has helped organizations justify budget for better planning
- Current concern with commodity volatility (e.g., copper price spike this year) appears to be growing, and organizations realize their existing solution resources on the software/third-party services side and internal resources are not sufficient to plan and forecast in this environment
- Finance -- and CFOs in particular -- are beginning to want procurement to pin down overall exposure and volatility to facilitate better planning and execution without surprises
- Taking advantage of new opportunities for risk reduction in the market (e.g., futures, forward contract, options, ETFs) requires better knowledge and a viewpoint towards where commodity markets may go
- Organizations are concerned with not just commodity pricing but commodity availability throughout their supply chain. As the bullwhip effect strikes hard during an upswing when new orders come in, companies are concerned with not just commodity availability and pricing, but their suppliers' ability to ramp up production in a timely manner. Any way in which companies can facilitate greater transparency by aggregating demand and raw material spend as well as locking in pricing can help take away risk from lower tier demand management, capital constraints and related commodity buying challenges
Where can companies turn for commodity and supply market intelligence? There are a number of good sources -- and mediocre ones as well. Stay tuned as we cover this market on Spend Matters in more detail. In the meantime, if you're curious about supply chain risk management solutions in general, you can download some of our latest research on the subject in this recent Compass research brief: The Intersection of Analytics and Supply Chain Risk Management -- Using Intelligence to Drive Early Intervention.
- Jason Busch