Now granted, some suppliers would laugh at if you brought this up currently (in Asian supply markets especially). Yet if your vendor does come back with their premium to lock prices for a period of time, it will raise other interesting questions, such as whether the quoted figure is less than the implied volatility would suggest. Or, perhaps, rather than assuming the commodity price risk yourself or having the supplier assume it, it might make sense to have a third party take it on. Depending on the commodity, there are many options (pun intended) in this case, including forwards/futures, exchange traded funds (ETFs) and, in certain cases, physical-backed exchange traded funds that take delivery -- and/or maintain access to -- the underlying material in their portfolios.
While we've hopefully impressed upon you so far that a commodity is not simply a commodity based on where it is in the world and where it's used/consumed in production -- prices, lead-times and availability may differ dramatically based on the market. One thing that is certain is that parties who have better access to information than their partners (suppliers, counter-parties, etc.) are likely to come out on top over the long run with their commodity risk management strategies. So before you get to tactics, think about your information architecture for commodities. Where will local prices come from? How will they feed into your systems of record? How will you aggregate demand and understand exposure up and down your supply chain?
Next up in this series, we'll look at what some best practice procurement and finance organizations are doing on both a pragmatic and philosophical level to take commodity risk by the reigns.