My colleague and Spend Matters Chief Research Officer, Pierre Mitchell, offered up his thoughts this morning on the intersection of commodity management and category sourcing at Commodity/PROcurement EDGE, taking place in downtown Chicago. Pierre captured the essence of procurement when he said that “supply outcomes equals business outcomes.” He noted, “At best, procurement is an enabler today. It’s not driving the train … yet if you do true commodity management, you can change the business and take control.”
During this talk, Pierre also observed that “sourcing suites also increasingly offering content templates, knowledge and pre-built integration to external indexes. This is when ‘tools’ start going beyond the “empty application.”
Commodity management tools, from providers such as Triplepoint, Brady, EKA, and SAP can help organizations manage commodity risk exposure, starting with demand forecasting and going through to production scheduling and finished products based on overall commodity risk exposure tied to underlying bills of materials.
These solutions were initially targeted at trading firms and trading arms of companies. But many have succeeded in migrating to the food and CPG industries. In addition, manufacturers are increasingly considering these solutions as well. However, adoption within the industrial world remains sparse, as few manufacturers are “doing” true commodity management.
Perhaps even more important than commodity management and category management when it comes to getting started with developing “beginner” or “starter” strategies is developing a perspective and insight into pricing and market intelligence. Pierre shared a number of screen shots from an integrated approach we’ve taken with BravoSolution and MetalMiner IndX in loading price index data for metals into a spend analysis tool, which shows actual price trending and PPV based on separating out material cost from the value added component of supplier activity.
Stay tuned as our live coverage from Commodity/PROcurement EDGE continues. We’ll discuss more advanced commodity and category strategies companies can deploy when it comes to planning, forecasting, and risk mitigation – as well as the technologies that can enable them.