News
Wednesday 27. July 2011
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| Purchasing risk: Volatile commodity markets |
| Risk management should be part of procurement |
| Many small and medium-sized businesses are up against the increasing volatility of commodity markets. That may critically affect not only margins but working capital and cash flow as well. Many small and medium-sized businesses so far have not established any strategic agreements or partnerships with their suppliers and are operating transactions-specifically — a significant corporate risk in case of raw material shortages and dependencies on suppliers. Often, their supplier strategies also lack any fundamental analysis of essential commodities. Frequently, industrial buyers do not know about any price volatility or trend analysis and also have no access to external databases or market reports. Likewise, the scenario method is rarely established so that many small and medium-sized businesses cannot cope with short-term developments on commodity markets. But supply bottlenecks will remain a problem in times of increasing order numbers and volatile commodity markets. Political influences frequently result in export limitations to secure the supply of domestic markets. Also, speculator and investor activities have their bearing on commodity markets. Purchasing should take over the risk management to be able to anticipate and intercept supply bottlenecks early on. Risk management includes early-warning indicators, emergency plans as well as strategic supplier management. Martin Kotula, Kerkhoff Consulting |
