The next normal: Accelerate your digital commodity management journey - The power of one - Eka ...
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The power of one. The next normal: Accelerate your digital commodity management journey
WHITEPAPER Overview Trading in volatile markets could lead to plenty of opportunities for more profits, but it also comes with higher risks. While commodity markets have always been volatile, the impact of COVID-19 on customer behavior has been sweeping and immediate. Spending across most industries is down and purchases have shifted to digital and contactless engagement. Static, on-premise CTRM systems do not work in volatile markets because they are not agile and weren’t made to adapt to client needs. They cannot be fully managed in a mobile environment with remote demos, flexible modules, and remote installations. These traditional systems can’t leverage modern collaboration tools like in-context chat and data sharing and they don’t use machine learning principles to spot opportunities, resulting in decisions that do not reflect real-time market conditions. To maintain a competitive edge and successfully navigate these new market conditions, you must look beyond inflexible CTRM & ERP systems and spreadsheets and adopt a more intelligent approach. You need a CTRM system that helps you make better decisions, faster, and is backed by data and real-time insights, not intuition. In this white paper we will demonstrate use cases from day-to-day trading scenarios to demonstrate how commodity enterprises can transform their way of working, starting with how the speed of decision making is faster on a digital cloud platform. 2 | At The edge of tomorrow: Commodity management reimagined
WHITEPAPER
The evolution of CTRM and ETRM
Commodity markets are changing in ways that no one could
have predicted even a few years ago. Worldwide access
to high-speed internet and cellular service, advances in Volatility increasing in 2020
computing power, innovative technology such as drones, the In a post COVID-19 environment, geopolitical
Internet of Things, AI and machine learning have transformed changes, trade battles and tariffs are shifting
commodity management from data-intensive to data around the globe. Supply chain pressures
overwhelming. have exploded, with food, chemicals and
essential commodities under new scrutiny
Commodity trading has always been data-intensive, and regulations. Commodity supply patterns
requiring traders to monitor and analyze mark-to-market, are changing, and costs are increasing. From
position, risk limits, physical trading, accounting, derivatives, aluminum to soybeans, once reliable sources
VaR, compliance, and logistics. Commodity Trading and of supply are quickly becoming uneconomic
Risk Management (CTRM) software was developed to help or being lost entirely as countries erect new
companies improve commodity management. barriers to imports.
However, traditional CTRM software and its related Energy Consumer Packaged Goods (CPGs) and
Trading and Risk Management (ETRM) software can fabricators could be particularly exposed if
only help so much because they were not designed to these trends, first established in mid-2018 and
incorporate data from outside the trading system. Creating exacerbated by COVID-19, continue in 2020
reports that incorporate external data requires relying on and beyond.
spreadsheets and custom systems, and often results in Companies that import and consume
errors and multiple versions of reports. These systems also commodities for finished products will need
tend to be static, running reports at specified times (such as to quickly identify new sources of supply and
end-of-day reports). They are not designed for on-demand determine the financial viability of the various
analytics and reporting. options available to them. Most commodities
have variable grades and qualities, so recipes
But the world has changed. Today, data comes to companies and production plans must be thoroughly
continuously, in real time and in a variety of formats and analyzed, and potentially adjusted, for these
systems. Commodity trading companies need to analyze firms to continue to address safety and
data fast, because the world does not wait for pre- quality and operate profitably.
scheduled reporting cycles. Commodity trading companies
need to analyze changes in real time, to flex and expand with Price volatility and downward pressure on
the market. prices will likely increase in 2020 across
virtually all commodities. With lower demand
for almost all commodities, geopolitical
instability and increasing discord within OPEC,
rapid and significant price movements are
greater than any time in recent history.
3 | At The edge of tomorrow: Commodity management reimagined
WHITEPAPER
What is Eka’s cloud platform for CTRM?
Eka’s Cloud Platform for CTRM disaggregates CTRM/ Eka’s Cloud Platform extends commodity trading across
CM into smaller composable applications, reducing reliance the entire value chain, creating a powerful, flexible, dynamic
on difficult and expensive to maintain monolithic CTRM system to optimize trading efficiency and proficiency.
systems and moving towards more agile and scalable
cloud-based platforms. It turbocharges commodity trading It boosts commodity management performance
and risk management by increasing the breadth, depth, and immediately by
speed of commodity management systems.
Eliminating data siloes
Breadth It is fully integrated across the entire value chain, ensuring
Eka’s Cloud Platform goes beyond trading and risk everyone has access to all the data they need whenever
management, connecting the entire value chain – including they need it. Users no longer spend hours or days
sourcing, trading and risk, operations, supply chain, and aggregating data for reports.
downstream. Companies no longer work in siloes. They
gain complete visibility into the entire value chain and Extending beyond trading and risk to the
collaborate more effectively with trading partners. entire value chain
It enables users to make decisions based on the entire
Depth picture, not just the information in their own piece of the
Combining big data with advanced analytics, including AI value chain. Users can analyze and optimize operations
and machine learning, commodity trading is based on deep across the entire value chain from sourcing to distribution,
analysis and real-time insight, not intuition or “what we did inventory movement, operational efficiency, and more.
last year.”
Enabling true collaboration
Speed It enables business collaboration. Eka enables data sharing
Eka CTRM aggregates and analyzes data in real time, and collaboration with internal teams and external trading
providing on-demand analysis and reporting and enabling partners digitally and in real time, enabling real-time
users to make better decisions, faster. In volatile markets, communication and collaboration so users can move fast to
time spent aggregating data yields lost opportunities and take advantage of new opportunities or mitigate risk
decreased profits.
WHITEPAPER
Breaking CTRM into bite-sized applications Enabling anytime, anywhere access
The power of an app-based platform is the flexibility to A mobile platform provides real-time access from any
create exactly the system and functionality needed with mobile device, because commodity markets are global and
the ability to easily expand when needed. Eka’s apps can be market shocks won’t wait for normal business hours. Online
used to create a new system or be integrated into existing mobile signatures and approvals make it easy to work from
CTRM systems to expand their functionality. anywhere.
Providing a native cloud platform Delivering self-service insights
A cloud-based platform enables faster implementations and Easy-to-use apps enable on-demand reporting, so users
requires no hardware, software implementations, or local don’t need to rely on business analysts to create essential
maintenance. Remote demos and installations with 24-hours reports. Because Eka’s Cloud Platform provides access to
support are available. Implementations are faster and easier, all available data and advanced analytics, users create the
and adding new functionality is quick and easy. The system insights they need when they need them.
is designed to flex and expand with the business.
Connecting to both external and internal data
Delivering powerful insights with AI and Eka’s CTRM integrates data from real- time market feeds,
machine learning spreadsheets, ERP systems, weather feeds, regulatory,
Seeded with years of deep domain knowledge, Eka provides market prices indices and more, enabling complete visibility,
insights that matter the most. faster analyses, and better decision making.
WHITEPAPER
The cost of relying on traditional systems
In rapidly changing markets, the costs of relying on older, disconnected systems
are significant.
Upfront costs of implementation. Traditional CTRM Manually incorporating data from external systems. The
is implemented on premise and involves lengthy problems of integrating data manually are twofold, it takes a
implementations and heavy IT involvement. Even lot of time and aggregating data manually creates errors.
systems claiming to be cloud-based often require ▪ Automated data aggregation takes seconds. Manually
long implementations to integrate systems. Digital collecting data from various systems and inputting all
commodity management provides a simple, cloud- based that data into spreadsheets or other systems takes
implementation with prebuilt connectors. It requires limited hours – or even days. While those hours or days pass,
IT involvement and goes live in just a few weeks at a fraction markets continue to move, and opportunities are lost.
the time and cost of traditional CTRM systems. ▪ Manual data aggregation results in errors – cut and
paste errors, incorrect formulas, collecting the wrong
Buying more than you need. Traditional CTRM and ETRM data. People make mistakes, and data errors can result
systems have an all-or-nothing framework, so you purchase in making bad trades. Automated systems do not make
the system and pay for the functionality whether you need mistakes.
it or not. Eka’s app-based platform enables you to buy just
what you need, and nothing more, but also provides the Making suboptimal decisions. Relying on data that could be
ability to add functionality quickly and easily later as you several days old does not work in rapidly changing markets.
grow. Implement the risk management you need today and By the time the data has been analyzed, and decisions are
add accounting and hedging tomorrow – it’s seamless, easy, made, the market has changed again. In fast moving markets,
and cost-effective. you need to be smart and fast. Relying on systems that don’t
use real-time data results in missed opportunities.
WHITEPAPER
How Eka’s digital platform turbocharges
commodity management
Digital commodity management monitors and analyzes data from across the entire value chain in real time – 24 hours a day.
It delivers visibility into the entire value chain, from internal systems monitoring inventory, position, operations, and logistics to
external data including market feeds and weather reports. The system provides real-time alerts when user-defined thresholds are
breached, enabling rapid response to mitigate risk or capitalize on new opportunities.
Designed to enable users to stay ahead in rapidly changing markets.
▪ Access data and insights from any mobile device, ▪ Share insights with your team by using the chat feature
because commodity markets do not stop to wait for you or any messenger app. The ability to collaborate when
to arrive at your desk. Today’s workforce will work from you need to, not just when you are sitting at your desk,
anywhere. provides a first mover advantage that can drive profits.
▪ Use AI and machine learning to create deep insights and ▪ Collaborate across the value chain. Digital commodity
make better decisions. Run simulations, analyze real-time management connects the entire value chain, so you can
and historical data, look for trends, optimize production, negotiate with suppliers and customers digitally and in
improve shipping and logistics, and more. real time and avoid delays inherent in email and phone
exchanges.
Eka’s cloud platform
enables you to collaborate
more, make better
decisions faster and
outmaneuver competitors.
7 | At The edge of tomorrow: Commodity management reimaginedWHITEPAPER
Eka’s cloud platform fuels energy trading
Imagine you are a crude oil trader and you are out of the office attending a
conference. While out of the office, you and the other traders learn of a cargo
that has just become available due to a canceled commitment. What happens
next varies significantly depending on if you use Eka or traditional CTRM.
Your process with
Eka’s cloud platform Traditional CTRM
▪ All the information you need to decide whether to ▪ Now you are in the same situation, but you have a
purchase the cargo is right in your hands. traditional CTRM system. This system has data silos
▪ You start by checking your position for the delivery and does not support real-time collaboration and
period to see if you need the cargo. You check credit analysis on mobile devices. What happens?
limits and exposure for the delivery period to ensure ▪ You email your team to request a position report for
that you won’t breach any limits if you complete the the cargo delivery time. You email credit and market
purchase. risk teams to confirm availability of credit and whether
▪ You evaluate the most profitable destinations to sell the exposure would remain within boundaries if the
cargo. You enter the trade as a simulated deal for a final purchase takes place and you wait…
limit check and to refine shipping and other secondary ▪ You receive emails back confirming interest in the
costs. cargo and credit checks, but now you must wait for end
▪ You review the simulations and make a decision…The of day reports to evaluate position. You wait…
entire process took just an hour! ▪ Having run the EOD report overnight, the risk manager
takes the output and creates a business impact report
and verifies it against business policies. You receive an
email stating that the deal looks good, but the risk team
needs their analysts to run a detailed scenario check.
You wait…
▪ The scenario analyses arrive via email and you review
it, call your team, and make the decision to purchase
the cargo. The cargo has already been sold. The entire
process took more than a day and resulted in a missed
opportunity.
8 | At The edge of tomorrow: Commodity management reimaginedWHITEPAPER
Farmers increase sales efficiency by trading
directly with agriculture companies
Today, many farmers rely on middlemen to coordinate sales time. The entire process can be completed in just a few
with large agribusinesses. With Eka’s Cloud Platform, this minutes, without the delays inherent in email and telephone
extra step is eliminated – saving time in the negotiation negotiations.
process and providing a level of visibility that benefits both
farmers and agriculture companies. The app connects directly with all internal systems, so the
contract and other necessary documents can be uploaded
It’s simple. Instead of waiting for a broker to negotiate a deal, and synced across the entire agribusiness instantly. Both
farmers access an app on their phone, computer, or tablet the farmer and the agribusiness can view all information
to see what agribusinesses are looking for which crops and about the transaction, including delivery and payments, on
at what price. They use the app to input their bid to provide the app. It’s quick and easy.
the crop and negotiate directly with the agribusiness in real
Empower procurement with Eka
One of the biggest problems with traditional CTRM systems What happens next? The trader opens the Procurement app
is the lack of real-time insight. Procurement professionals on a tablet and begins running simulations. He evaluates
must secure raw materials at the best price, on time and expected results based on the price swings and shares
within budget. If there is a sudden shock to the market – a these analyses with his team via the chat feature. All the
pandemic, hurricane, fire, or earthquake; new tariffs; civil team members review the analyses and they schedule a
disruptions et al – they need to assess the impact on their meeting for first thing in the morning at 8:00 am, to create
portfolio and ensure they can still get the materials they a plan and execute a procurement and hedging strategy for
need at an acceptable price. the new market reality. By 8:30 am they have a plan in place
and are moving on to the next order of business of the day.
At every step of the way, Eka’s Cloud Platform is superior to
traditional CTRM. The moment the disruption occurs, prices Meanwhile, the other trader finally learns about the price
will be impacted. While two traders in the same city sleep shock and begins collecting data on current prices,
peacefully, the price of one of their inputs is skyrocketing. historical prices, and current and forecasted purchases.
The difference is that the trader with Eka will receive an alert Because all of this information is stored in disparate
the moment the price crosses a pre-defined threshold and systems, manually aggregating it takes several hours, so they
the other trader will not. The alert enables the trader to start do not begin analyzing it until the next day. At that point,
evaluating options and creating a plan before traditional they run simulations and advanced analytics to evaluate
CTRM users even know there is a problem. options for a procurement and hedging strategy, but they
are two full days behind the team using Eka, so prices have
changed, contracts have been secured, and opportunities
have been lost.
9 | At The edge of tomorrow: Commodity management reimaginedWHITEPAPER Improve risk management: Story of a U.S. based dairy company background A US dairy organization was looking for an effective way by the time it could see its true exposure, creating missed to monitor profit margins from milk and processed milk opportunities. Its risk policies were not in line with business products. The company was spending too much time defined thresholds and risk limit breaches often occurred gathering data for analysis. and were not immediately detected. Prior to implementing Eka software, the company would Analysis of gains and losses took a long time to create, manually pull data from existing systems – spreadsheets for thereby increasing risk due to delays in identifying market inventory, Oracle ERP for physicals, direct brokers’ statement risk. from multiple brokers, different formats for derivatives, spreadsheets for additional information on inventory, market data from multiple data feeds and websites – finally apply rules and adjustments to handle exceptions, process issues, and flag inaccuracies. Because this was a time-consuming process, the company’s hedging strategy wasn’t optimized. The market would move
WHITEPAPER
How Eka’s cloud platform helps
Eka’s rapid deployment means a quick ROI. The dairy The management team can evaluate budgeted spending,
company implemented Eka’s Position, Mark-to-Market, actual spending, projected spending, and coverage across
Procurement and Risk apps in just 8 weeks. Now, they can the organization in real-time. Using the Position and Mark-
consolidate and automate contracts and inventory from ERP, to-Market apps, the company can view exposure at the
budgets and forecasts from spreadsheets, and CSV broker click of a button instead of waiting days for manual reports.
statements from FCM for all products. Eka’s platform also eliminates any chance of human error
while it aggregates, blends, and analyzes inputs from all data
With Eka’s platform the company can aggregate data from sources to provide one, accurate visual representation of
disparate systems, helping it to mitigate risk exposure. position in real-time.
Users can create instant executive dashboards and receive
real-time alerts for breaches of risk limits, enabling a quick
response to increased risk.
Traders make smarter stock and sell decisions
A trader balances managing physical positions or inventory storage, logistics, markets, and shipping. Eka’s Cloud
purchased from suppliers with trading to maximize profits. Platform enables traders to access all this information on
To make the most profitable decisions, the trader must stay one platform in real time.
on top of open positions, inventory, perishability (if relevant),WHITEPAPER
The Process With
Eka cloud platform Traditional CTRM
▪ The trader logs into the platform to check his inventory • The trader checks his open contracts and inventory
position and open contracts in the morning. With Eka position in the CTRM system in the morning to
he can access overall exposure across his physical understand his overall stock position.
inventory and financial position in one place and analyze • He looks at the market curves using an external system.
his position with real-time market prices and current news He runs what-if scenarios on spreadsheets to simulate
impacting the market to see what his open positions are. varying market conditions and evaluate decisions to sell
▪ Still logged onto the Eka Cloud Platform, the trader on spot markets or hedge future positions with exchange
quickly checks the Mark-to-Market app using current contracts.
pricing and identifies the positions he wants to sell. He • He then manually checks the credit of counterparties
runs a few what-if scenarios to evaluate the potential with his mid-office and decides who to sell to. He
impact of news and prices on potential trades. completes the trades and manually enters them into the
▪ He compares selling on spot markets against hedging CTRM system. After execution, the back office matches
future positions with exchange contracts. He identifies the trades manually with vessel/inventory logistics to
counterparties that buy his stock and runs a live credit complete physical delivery.
check on counterparties prior to confirmation. • He executes these transactions and is immediately able
▪ He then runs a three-way pegging to match his open to see real-time inventory forecasting showing his current
position/purchase/sales/shipment and planning to ensure position net of inventory and sales.
he maximizes efficiency end-to-end. • He then waits until the next morning for the end-of- day
▪ He executes these transactions and is immediately able report to understand his overall position and P&L versus
to see real-time inventory forecasting showing his current market prices. When he arrives at work the next day, he
position net of inventory and sales. starts the day by evaluating position and P&L based on
▪ At the end of the day, he scans through the P&L and the end-of-day report and once again must check open
position reports and shuts down for the day knowing contracts and inventory position based on this updated
exactly where he stands because he has stayed on top of information. He executes a series of trades. He is always
his position all day. He does not need to wait for end-of- out-of-step with the market.
day reports.
Increase profits with
back-to-back trading
Traders use back-to-back trading to mitigate risk. The trader purchases the physical commodity from the producer and mitigates
risk by selling this position to a customer. For example, a trader makes a commitment to purchase six-month corn from a farmer in
Kansas and goes short on corn with Nestle in Illinois for the same period.
12 | At The edge of tomorrow: Commodity management reimaginedWHITEPAPER
How does Eka’s cloud platform help?
When a trader logs into the Eka Cloud platform to check his able to access multiple data sources and assess arbitrage
position and P&L in the morning, he gains an accurate, real- opportunities. The trader can now log the trades into the
time view of exposure and P&L based on current market system. Because Eka provides one platform for all trading
prices. He can quickly evaluate the impact of the latest news applications, the back office has the same information in
on his position and P&L. hand immediately and can match the trades to available
vessel logistics ensuring the delivery from the supplier
He can run real-time Mark-to-Market analytics using current matches the pickup logistics from the customer.
prices, identify open positions and run what-if simulations
to evaluate the impact of various trades he can do to With Eka, the trader can evaluate position and P&L with
offset the impact of current events on his position. He can real-time market checks and make further tweaks, if needed.
examine every scenario using real market prices, his current Even better, he receives an alert if market price shifts
position and P&L to identify the actions he needs to take. require him to act, so he worries less and is free to focus on
taking more positions to boost profits.
Because the integration layer in embedded in the platform
with multiple as-is market data connectors, all data is
instantly integrated with the system. This way traders are
How does this compare to traditional CTRM?
When the trader wants to check his position on contracts in end-of-day closure report to understand overall end of day
his CTRM system he must run all impact analysis on position and P&L versus market prices. When he arrives at
spreadsheets outside the system. He looks at market curves work the next day, he starts the day by evaluating position
on external systems and must use the previous day’s end- and P&L based on the end-of-day report and once again
of-day reports to evaluate the impact on mark-to-market. must execute a series of trades. He is always out-of-step
If he wants to evaluate what-if scenarios, he has to use with the market.
spreadsheets.
When he completes the trades on the CTRM, the back office
must execute the transaction matching available logistics
(vessel & date) to the purchase/sale. He then waits to run an
13 | At The edge of tomorrow: Commodity management reimaginedWHITEPAPER Conclusion Traditional CTRM systems are inflexible and disconnected, forcing commodity companies to work out of step with the digital productivity of other industries. This has meant lower productivity, slower decision making, and overall suboptimal markets for all parties from farmers to traders, logistics companies, food manufacturers and end consumers. To be profitable, the business of trading needs a robust, cloud commodity management platform. One that fully incorporates realities of uncertain markets, adapts to changing levels of volatility in real time, and not previous day prices or end of day reports. Commodity businesses need a flexible solution that can make disconnected systems work like a collective brain by analyzing data from disparate sources and providing solid insights backed by data rather than gut instincts, so they have every bit of information that helps them take the best decision to move at the speed of markets. 14 | At The edge of tomorrow: Commodity management reimagined
60+
Countries
100+
Customers
50+
Apps
The power of one.The power of one. To learn about how Eka can add value to your operations. www.eka1.com info@eka1.com About Eka Software Solutions Eka Software Solutions is a global leader in providing digital solutions for Trading & Risk, Supply Chain Management and Financial Services driven by Cloud, Blockchain, Machine Learning and Analytics. The company’s best-of-breed solutions serve the entire trading value chain across agriculture, energy, metals and mining and manufacturing markets. Eka’s Cloud Platform provides advanced analytics, one source of data and an automation engine, providing maximum flexibility and investment protection as business needs and market requirements change. Eka is committed to ensuring its 100+ clients can work from anywhere and collaborate across ecosystems within a secure and trusted environment. For more information, visit www.eka1.com and follow us on LinkedIn and on Twitter.
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