Beyond Strategic Sourcing: Building the Business Case For Commodity Management (Part 1)

- April 4, 2012 7:04 AM
Categories: Technology |

Here at Spend Matters and MetalMiner, we’ve been doing quite a bit of research recently in the area of commodity management. If you want to dig into the topic in detail, including strategies to mitigate commodity volatility at all tiers of the supply chain, check out our recently published research briefs: Minimizing Commodity Volatility Through Advanced Commodity Management and Hedging Approaches and Beyond Sourcing and Supply Chain: Commodity Management Solution Fundamentals. In the second paper, we spend quite a bit of time outlining 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 — not to mention why now is an optimal time for making the right investments (hint: quit before the next commodity storm).

In Beyond Sourcing and Supply Chain: Commodity Management Solution Fundamentals, we suggest that building the business case for investment in commodity management is a relatively straightforward and largely quantifiable exercise. Starting with modeling the impact of commodity volatility and rising prices with at-risk P&L exposure, organizations can begin to understand that smaller upfront investments required across processes, platforms and talent might just have transformational impacts on reducing risk. Moreover, as companies begin to consider their broader exposure to supply chain risk on a country-specific level including currency- and commodity-related volatility, the case for commodity management often becomes even stronger.

From a technology perspective, it is critical to think about how commodity management technologies relate to the broader software environment, from ERP to sourcing to supply chain planning and forecasting — not to mention the paradigm shift involved in how these tools can approach information management. On a summary level, nearly all the major technology investments to date have been from the bottom to the top — from the material/ingredient level on up. These have included ERP, MRP, e-sourcing/category management, planning/forecasting and related investments.

But for commodity management, our research suggests the next wave of investments will take an opposite approach. Stay tuned as we investigate this topic in more detail in Part 2 of this post. And in the mean time, download Minimizing Commodity Volatility Through Advanced Commodity Management and Hedging Approaches and Beyond Sourcing and Supply Chain: Commodity Management Solution Fundamentals. Readers should take note that within the next sixty days, our research will only be available to qualified practitioners free of charge.

- Jason Busch

* Required fields  [email address will not be published]

*