Commodity Management and Supply Chains

For most raw materials and commodities, the supply chain is both long and complex. Increasingly, firms have been focusing on these supply chains in an effort to better control operational risks and exposures, but increased geopolitical and other risks have now served to sharpened that focus even further.

Issues like COVID-19 lockdowns and trade wars, for example, have meant that managing sourcing, movements, processing, production, procurement, contracts, storage and other activities along complex supply chains more effectively not only reduces costs and improves profitability, but also helps ensure business continuity. Meanwhile, although CTRM (Commodity Trading and Risk Management) software applications that help manage trades and the risks associated with trading are seen as critical, the broader commodity management aspects around managing the supply chain more effectively are rightly gaining in importance.

1. Commodity Management
and Supply Chains
WHITE PAPER
Sponsored by

2. Commodity Management and Supply Chains A ComTechAdvisory Whitepaper
INTRODUCTION
For most raw materials and commodities, the supply chain is both long and complex.
Increasingly, firms have been focusing on these supply chains in an effort to better
control operational risks and exposures, but increased geopolitical and other risks
have now served to sharpened that focus even further.
Issues like COVID-19 lockdowns and trade
wars, for example, have meant that managing
sourcing, movements, processing, production,
procurement, contracts, storage and other
activities along complex supply chains more
effectively not only reduces costs and improves
profitability, but also helps ensure business
continuity. Meanwhile, although CTRM
(Commodity Trading and Risk Management)
software applications that help manage trades
and the risks associated with trading are seen
as critical, the broader commodity management
aspects around managing the supply chain more
effectively are rightly gaining in importance.

3. Commodity Management and Supply Chains A ComTechAdvisory Whitepaper
© Commodity Technology Advisory LLC, 2020, All Rights Reserved.
SUPPLY CHAIN MANAGEMENT
Managing supply chains effectively is a key attribute
of a successful and profitable business. This not only
means sourcing, moving, processing, and accounting for
various activities and commodities, but these days, also
includes traceability and tracking through that supply
chain. The ability to track end products back through
the supply chain to point of origin for purposes such
as food security, recall (brand protection), traceability,
environmental (deforestation, CO2 etc.), sustainability,
social factors (slave and underage labor), regulation,
supply chain optimization, and vendor optimization
is very important. Buyer purchase preferences and
regulations around social and environmental issues
require this and, should a substandard product reach
the market, then brand protection policy requires it.
Another key aspect to supply chain management is the
plethora of documents that must be created, signed,
shared, and maintained, ranging from bills of lading to
customs documents. Ensuring the right document is on
hand at the right time can avert a penalty or delay.
Other critical activities include collaboration with third
parties including vendors and suppliers and monitoring
their effectiveness. Identifying vendors or suppliers
that are often late or provide substandard goods or
services can help eliminate inefficiency. In the same
vein, identifying very manual and repetitive business
processes or use of spreadsheets and automating or
eliminating these can also help. Here workflow can use
automation and even AI to keep employees focused
on exception management and problem resolution.
Managing shipping, movements, processing and other
activities along the supply chain efficiently also means
having transparency into those activities and identifying
any likely issues or bottlenecks.
Managing operational risk and the effectiveness of
supply chain activities also goes hand-in-hand with
managing other risks like price and credit risk. Contracts
and agreements often include optionality that needs
to be effectively managed as well as complex pricing
When political decisions can mean supply disruption or more costly supply, having alternatives
can be the key to maintaining competitive finished good pricing. Equally, when disruptions along
the supply chain can result in the need to use alternative transportation routes or modes of
transport, it pays to be in a position to respond. In the last couple of years, these have been some
of the challenges posed to those in the business of procuring raw materials. Even without such
unwanted complexities, managing supply chains is a complex activity fraught with operational
risks such as delays, missing documentation, quality issues and more. Each of these issues
can add costs in the form of penalties and extra expenses that were unplanned and eat into the
bottom line. COVID-19 has brought with it many additional complexities, such as a home-based
workforce, making managing operational risks even more difficult.
3

4. Commodity Management and Supply Chains A ComTechAdvisory Whitepaper
© Commodity Technology Advisory LLC, 2020, All Rights Reserved.
COMMODITY MANAGEMENT
Commodity Management (CM) software solutions are now emerging that incorporate the key
functions and features of ERP solutions with that of CTRM software. They help manage all aspects
of a commodity business from sourcing to production with increased efficiency and an emphasis
on most forms of risk management. Whereas the focus of CTRM is on trade management and
market risks, the Commodity Management solution incorporates the entire supply chain, helping
manage logistics, inventory, processing, and much more.
4
arrangements. Hedging may or may not be possible
depending on the raw material being moved and
managed and whether there is a financial market for
that product or commodity, thus introducing additional
complexities around managing margins and exposures.
Monitoring counterparties is also a key activity in
ensuring that exposures are within reasonable and
planned ranges at all times.
Beyond these supply chain activities, managing cash
is also a critical activity and this often has an FX
aspect to it as multiple currencies are frequently used.
Treasury and FX activities also need to be well planned
and managed, as there are also legal and contractual
issues in funding different business entities in different
jurisdictions and/or ensuring adequate funding of
operations along the supply chain. In some instances,
transferring funds into or out of certain countries
requires certain notifications and conditions to be met,
for example.
This all adds up to complexity and exposures to various
risks that can be difficult to manage, especially if the
business is involved in multiple commodities each
with their own specific supply chain and issues and
a requirement to manage cross commodity risks and
exposures. It is no wonder that digitalization has become
a buzz word in commodities, as any entity involved
with raw materials and commodities seeks to increase
efficiencies and effectiveness in their operations.
Eliminating spreadsheets and manual processes and
replacing systems that can’t support business agility is
a key thrust in IT across the industry where change is
the new normal.
Commodity Management solutions, with integrated
workflow and approvals, document management
and ERP-like functionality, can help commodity firms
ensure that time frames are met, risks are managed,
and costs controlled. They help increase the efficiency
of supply chain operations and alert users and
management to potential issues. Furthermore, they can
aid in collaboration – not just between departments –
but also with partners and business associates. With
Commodity Management software available via cloud
deployment, issues around home-based workforces
can be easily managed as well.

5. Commodity Management and Supply Chains A ComTechAdvisory Whitepaper
© Commodity Technology Advisory LLC, 2020, All Rights Reserved.
Commodity Management (CM) solutions have a
broader footprint than traditional CTRM, although
there has been a trend for CTRM software vendors to
try to extend their functionality into the supply chain as
well. CM offers the trade and market risk management
features of CTRM software but extended with integrated
ERP-like functions as well that can include;
• Contract management and origination functionality
to help in sourcing and agreeing purchases and
sales over a longer-term horizon,
• Logistics including all forms of transportation, route
and vessel management, estimated and actual cost
tracking, documentation and more,
• Inventory management at multiple locations
tracking quality factors as stock is consumed and
replenished,
• Quality management, including tracking each raw
material and quality details at each stage (e.g.
receipt, blending, packaging, etc.),
• Accounting, financials and treasury, amongst
others.
A fully integrated CM solution may come with its own
accounting solution to form a fully integrated solution
for the business, or it may require some degree of
integration with a commonly used accounting package
like SAP or JDE, for example.
As trade margins have been squeezed and supply
chains monitored more closely, there has been a
growing interest in CM as opposed to CTRM, especially
in bulk commodities like mining and ags & softs where
managing the physical commodity is so critical to
maintaining profitable and efficient operations. This
has seen a number of CM solutions emerge specifically
for commodity players as well as many of the CTRM
software vendors adding incremental functionality.
5

6. Commodity Management and Supply Chains A ComTechAdvisory Whitepaper
© Commodity Technology Advisory LLC, 2020, All Rights Reserved. 6
The software is a strong CM platform that offers
financials and accounting functionality as well as CTRM
and ERP-type functions like,
• Quality management
• Traceability and certifications
• Production planning
• Inventory management
• Logistics and movements
• Coverage reporting
• Contact management
• Portal for collaboration
• Recipes and processing.
As a fully functional solution available in the cloud,
i21 offers users a number of the business benefits
associated with Commodity Management including;
• Fewer delayed and missed activities. Workflow,
alerts and notifications to users drive focus to issues
like sending shipping instructions and pricing
unpriced contracts before first notice day,
• Automation of tedious business processes via
workflow to save employee time,
• Collaboration with business partners and customers
via portals allowing data entry and inspection of
pertinent information, reducing time spent on such
activities,
• More efficient audits due to comprehensive audit
trailing available in the solution that allows auditors
to easily see what and why things were done,
• Centralized document repository providing easy
access to documents for those that need them,
• Time savings by integrating directly to markets for
derivative and settlement prices,
• Replacement of Excel spreadsheets and other
home-grown systems that can cause security and
data management issues,
• Greater emphasis on overall profitability via tracking
costs across the supply chain and tracking of
forecast to actuals,
• Ability to perform vendor assessments looking
at late shipments, rejected samples and other
measures of vendor performance. Significantly
enhanced supplier performance measurement
to influence procurement decisions and drive
continuous improvement. Place responsibility
where it belongs, e.g. on Grower, Vendor, Shipping
iRely is a well-funded, 30-year old business with a track record of success in commodities like
Coffee, Tea, Cocoa and Spices. Irely operates globally and is known for its commitment to
customers. i21 is its software platform. It was completely redeveloped on a modern technology
stack with a modern UI and is available on premise or in the cloud.
IRELY – A LEADING COMMODITY
MANAGEMENT PLATFORM

7. Commodity Management and Supply Chains A ComTechAdvisory Whitepaper
© Commodity Technology Advisory LLC, 2020, All Rights Reserved. 7
Line as appropriate,
• A modern UI so users can better consume and
visualize key business information,
• Better compliance and regulatory risk management,
• Integrated and live risk management reporting
– position/risk always known in real time and
consistent with actual transactions (not separate
spreadsheet system with possibility of inconsistent
data/errors), and
• Cost forecasting to avoid surprises and test the
impact of possible market scenarios for contingency
business planning.
I21, as a leading CM solution, can provide many of the
required benefits discussed above and help its users
by providing measurable cost reductions and revenue
improvements, improved risk management across all
forms of risk, as well as many intangible benefits such
as improved counterparty and vendor relationships and
a better ability to forecast business performance. Being
the primary repository for much of the information
about the business, it also provides numerous ways to
access that information quickly and easily so as to make
informed business decisions.

8. Commodity Management and Supply Chains A ComTechAdvisory Whitepaper
© Commodity Technology Advisory LLC, 2020, All Rights Reserved. 8
SUMMARY
Any company dealing with physical commodities is
aware of just how complex and volatile that business
can be. Change is the only constant in the world of
commodities, and this has become even more so over
the last couple of years due to geopolitics and the
COVID-19 pandemic. As trade margins are squeezed
and costs escalate, successful commodity businesses
seek to effectively manage supply chains and look for
greater collaboration, more streamlined processes and
digitalization. This in turn is driving interest in Commodity
Management solutions that combine commodity-
specific ERP functionality with that of CTRM software
in a modern architecture stack deployable in the cloud.
iRely, with its i21 platform, is one example of a solution
that ticks many of the boxes associated with the needs
for commodity management.

9. ABOUT IRELY
iRely is a leading global supplier of innovative software
solutions that help its agriculture and consumer
products clients manage their core business
processes. Based on a single, modern and easy-to-use
platform, which can be easily configured to customer
requirements, iRely has attracted and retained a large
and referenceable customer base over its 30-year
history and developed a reputation for its laser focus on
customer success.

For more information, please visit
www.irely.com

10. ABOUT
Commodity
Technology
Advisory
LLC
Commodity Technology Advisory is the leading analyst organization covering the ETRM and
CTRM markets. We provide the invaluable insights into the issues and trends affecting the
users and providers of the technologies that are crucial for success in the constantly evolving
global commodities markets.
Patrick Reames and Gary Vasey head our team, whose combined 60-plus years in the energy
and commodities markets, provides depth of understanding of the market and its issues that is
unmatched and unrivaled by any analyst group.
For more information, please visit:
www.comtechadvisory.com
ComTech Advisory also hosts the CTRMCenter, your online portal with news and views about
commodity markets and technology as well as a comprehensive online directory of software
and services providers.
Please visit the CTRMCenter at:
www.ctrmcenter.com
19901 Southwest Freeway
Sugar Land TX 77479
[phone]
Prague, Czech Republic
[phone]
ComTechAdvisory.com
Email: [email protected]