New, Free Research: Recalibrating Commodity Management, Advanced Sourcing Strategies

Spend Matters, MetalMiner and Trade Extensions have teamed up to deliver this groundbreaking new research, available for download for free but only for a limited time. A Radical Rethink of Commodity Management and Advanced Sourcing Strategies – Advanced Tactics That are Possibly Today by Jason Busch (managing director of Spend Matters), Lisa Reisman (managing editor of MetalMiner) and Garry Mansell (CEO for Trade Extensions) can be found here.

An excerpt: “During the summer of 2014, Lisa Reisman and Jason Busch got together with Garry Mansell of Trade Extensions to brainstorm ways in which they could apply their knowledge of metals/commodity markets and sourcing strategies with the capabilities of sourcing optimization technology*. Lisa has over two decades of metals trading and direct materials sourcing experience. Jason is one of the best-known technology analysts in the procurement and supply chain market and was one of the e-sourcing pioneers at FreeMarkets during the late 1990s.”

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Voices (2)

  1. Jason Busch:

    Alan, I loved your comment, but I think you’re wrong 🙂 Let’s discuss tonight when we catch up. Lisa and I (and many others on the team) work with metals buying organizations on precisely these problems and the opportunity is huge … we are not talking “trading functions” here within companies necessarily, but rather corporate procurement or P&L owners tasked with managing commodity volatility at either the tier one or lower tier level. Precious few companies address the commodity portion of spend (within a cost breakdown model) effectively and even fewer consider volatility risk as part of sourcing decisions.

  2. Alan Holland:

    I concur with the objective of bringing a more scientific approach to sourcing commodities but I believe that implying sourcing optimization tools is not the right solution as it conflates the scientific challenges under-pinning the respective buying processes. Commodity buyers deal with stochastic optimization problems and risk management for hedging against volumetric and price risks via storage or options trading. Strategic sourcing ordinarily deals with combinatorial optimization problems (a deterministic optimization problem). There are some sophisticated tools to support commodity buying and informing on options valuations and these tools are derived from experts in the fields of Quantitative Analysis. The expertise to optimise commodity buying originates from the fileds of Advanced Mathematics and Particle Physics whereas the expertise for optimizing more general sourcing challenges is in the field of Discrete Mathematics or Computer Science. There are distinct fields because the underlying challenges are fundamentally different. Commodity buyers look at trading strategies that maximize intrinsic value or extrinsic value of assets such as storage facilities and this type of analysis is beyond the scope of general sourcing teams.

    I’m not and advocate of silos in general but I feel in this case that there is a sound basis for separation of commodity buying teams from general sourcing. You simply need different experts and different tools for the two challenges.

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