Optimize Your Agriculture Supply Chain with Smart Commodity Management
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Transcript of Optimize Your Agriculture Supply Chain with Smart Commodity Management
Optimize Your Agriculture Supply Chain with Smart Commodity Management
John SchimelpfenigExecutive Principal,
AXCELERUS
Michael SchwartzEVP & Chief Marketing Officer,
Eka
www.ekaplus.comwww.ekaplus.com
Agenda
2
Featured Speaker: John Schimelpfenig, AXCELERUS
• 2014 trends in commodity markets
• Top 5 customer issues in agricultural trading, risk and supply chain management
• How businesses can address these challenges
• Old business model vs. new business model
Eka Background and Solutions
• About Eka, Customers, Global Presence
• Next-Generation Smart CM Platform
• Eka Agriculture Solution
Join the conversation:@EkaSoftware
#ekawebinar
www.ekaplus.comwww.ekaplus.com
Featured Speaker
3
John SchimelpfenigExecutive Principal, AXCELERUS• 25 years of experience as a risk management
professional and trader in global commodities markets
• Provides expertise as an independent and objective source of solutions for risk governance, trading, operations, shipping & logistics, and technology for commodity markets
• Prior to AXCELERUS, John ran his own successful consultancy with projects covering risk policy/business process improvement; CTRM system functional/technical evaluation; and CTRM system selection and implementation
• 11 years with Deloitte’s ETRM/CTRM practice providing energy & commodity services to Fortune 500 & Mid-Market companies
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© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
A changing global landscape…
2014: Trends In Commodity Markets
Acquisitions & Investments
Financing Sources
Cross Commodity Asset Plays
Global Commodity Regulation
Uncertain Supply & Demand
5
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
2014: Trends In Commodity Markets
¹ Source: RealEstateRama.com: 6/19/14
² Source: Dow Jones Business News 7/9/14
Acquisitions & Investments
New Financing Sources
Acquisitions & Investments
Private Equity investments in agricultural efficiency, farmland, CTRM
technology
Low agriculture debt pushing farmland prices higher (especially irrigated)¹
Vitol + Glencore + Cargill + Trafigura > $100B USD²
New: Cargill/Copersucar JV forms largest sugar trading venture
Mecuria buys JPMorgan’s physical commodities business
Chinese companies continue to acquire commodity assets/producers
Global Commodity Regulation
Uncertain Supply & Demand
THERE’S A FLOW OF CAPITAL ENTERING
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© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
2014: Trends In Commodity Markets
Cross Commodity Asset Plays
New Financing Sources
Not all banks have exited: BTG, Macquarie, Wells Fargo, CIBC, Standard
Chartered, Goldman investing in talent and portfolios¹
Merchants (Mercuria, Cargill, Trafigura, Rosneft) taking a greater role in
highly physical part of market¹
Common footprint: origination, supply, transportation, trading and
warehousing
Sovereign Wealth Funds investing land, production, fertilizers (secure supply)
“Best of Breed” CTRM trend in large participants
Cross Commodity Asset Plays
Global Commodity Regulation
Uncertain Supply & Demand
SUPERBROAD CAPABILITIES
¹Source: Forbes 4/29/14
7
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
2014: Trends In Commodity Markets
¹ Source: Dow Reuters 7/13/14
² JournalGazette.net: 7/13/14
Acquisitions & Investments
Financing Sources
Cross Commodity Asset Plays
Mercuria new $2.65 Billion USD credit facility
Freepoint Commodities $1Billion USD credit facility
Private Equity investing in farmland, food producers
Large commodity traders such as Glencore, Vitol, Trafigura and Mercuria
are stepping in to plug the gap in trade finance¹
About $5.9 billion was added to raw materials investments this year²
Global Commodity Regulation
Uncertain Supply & Demand
BANKS STILL LENDING
8
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
2014: Trends In Commodity Markets
Acquisitions & Investments
Major US/EURO banks exit commodity markets
Regulators turn attention to the “known unknown” commodity traders
EMIR, Dodd-Frank, CFTC impact all market participants (yes, end users will
have compliance reporting)
Regulatory scrutiny collateral of Chinese commodity loans ($160B)¹
New Financing Sources
Cross Commodity Asset Plays
Global Commodity Regulation
Uncertain Supply & Demand
RELENTLESS INTERNATIONAL REGULATIONS
¹Source: Bloomberg 3/18/14
9
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
2014: Trends In Commodity Markets
Acquisitions & Investments
New Financing Sources
Cross Commodity Asset Plays
Global Commodity Regulation
High crop yields forecasted in US grains/seeds = surplus & low/stable prices
Economic uncertainty in China, Emerging Markets & Europe = downward
demand & prices
Bloomberg Index of 22 raw materials down 3.7 percent Apr-Jul 20141
Oilseed crush margins trending lower – & negative in some regions (China)
Forecasted higher global bulk shipping rates squeeze profit margins2
Uncertain Supply & Demand
OPERATING IN LOW PRICE/LOW VOLATILITY MARKETS
1 . Source Wall St Journal 6/19/14
2. Source Ag Professional 7/8/14
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© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
Cost management, smart hedging, and efficiencies in supply chain
operations are key client issues in today’s environment.
* Source: AXCELERUS internal research 2014
22%
15%
10%
26%
27%
Cost/Cash Management
Risk/Hedging Effectiveness
Operational Efficiencies
Accurate & Timely Market Intelligence
Regulatory Compliance
What Are the Key Issues in this Global Context
11
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
Common Business Objectives
Supply Chain
Management
Margin
Improvements
Innovative
Pricing Tools
Client
Relationship
Management
Brand
Enhancement
Cost/Cash
Management
Risk/Hedging
Effectiveness
Operational
Efficiencies
Accurate & Timely
Market Intelligence
Regulatory
Compliance
Key issues impact a number of common business objectives for our clients…
…with supply chain management critical in today’s competitive global markets.
Issue Impact on Supply Chain Objectives
12
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
ePayments
(A/P, A/R)
Inventory & Plant
Delivery & Logistics
Supplier Management
Procurement Strategy
Need Analysis
SettlementsDelivery & Logistics
Risk Management
Analytics/
Reporting
Credit
Risk
Trading & Hedging
Forecasting & Planning
Analysis
Silo 1: Procurement/Logistics/Plant Management
Focusing on operational risks: product flow, inventory,
manufacturing & processing
Silo 2: Commodity Trading & Risk Management
Focusing on trading, price and credit risk
management
Silo 3: Corporate
Accounting/Treasury
The traditional agricultural industry business model bifurcates
functions into separate operational and transactional activities…
…often utilizing
separate tools & spreadsheets to
manage business
operations and develop reports
Old Business Model: Siloes & Spreadsheets
13
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
Inefficient coordination among processes and systems hits companies via
a continual erosion of bottom line margins…
…what we call death by a 1000 cuts: Where the razor nicks:
High, recurring, unanticipated freight & logistics
costs (demurrage, bunker, port/customs fees)
Contract defaults resulting from late shipments,
incomplete L/C documentation
Trading losses from uncovered/under-hedged
inventory positions (WIP, Finished Goods)
Inaccurate P&L attribution (multi-commodity positions)
Interest costs of delays from manual cash processes in AP/AR processing
Extensive (3-4 week) monthly financial closing process
Unplanned cost of plant shutdowns due to inventory imbalances (high/low
stocks)
Unbudgeted costs (technology/processes) for regulatory reporting
compliance
Data quality - duplication and data re-keying
Old Business Model: Supply chain is slow and costly
14
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
The Role of Spreadsheets in Commodity Businesses
…..EKA and AXCELERUS
recently co-authored a
white-paper on the 8
ways commodity
management systems
should be used instead
of spreadsheets and
manual business
processes
*The Information Olympics:, Commodities Now, Vol. 18, Issue 2, June 2014 . Commodities-now.com
Commonly used for:
Data Analysis
Official Reporting
Data Integration
Systems of Record
Manual Data Entry Error
Not Secure
Lack of Audit Trail
Reference Integrity Issues
Stale Business Logic
15
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
Complex markets, multi-asset operations, and global distribution channels are
driving agricultural companies to move toward a more cohesive view of their
supply chain risk management…
…with a focus on improved decision-making, profitable operations,
operational efficiencies driving competitive advantages in global markets
Market Intelligence & Analysis
Procurement Strategy
Transportation & Logistics
Trading & Hedging
Risk & CreditManagement
Accounting, Settlements,
Financial Reporting
Risk Reporting & Compliance
Plant & Inventory
Management
Product
Channel Management
New Business Model: An Integrated Approach
AXCELERUS has several tools (CTRM IQ™ & AppRat™) to assist aligning/optimizing your CTRM value chain
16
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
The sweet spot is a point where processes and systems are aligned as a front-
to-back solution…
… to provide the appropriate level of transparency, efficiency, accuracy to
be competitive and profitable as a player in the global markets.
Business Goal: An Integrated Solution Architecture
…Good CTRM vendors may provide much but not all of
required functionality!
…spreadsheets used for analysis,
but limited as reporting tools and definitely not as primary repositories of
data
17
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
Summary
5 Key Sign-Posts to Watch For:
Are you “old business model” (silos/spreadsheets) or “new
business model” (integrated data and reporting from
centralized, reliable sources)?
Are you re-aligning functional processes to improve
integration across your entire supply chain?
Are you focused enough on the bottom line? - margin/cost
management is important for trading, logistics, plant
operations, and payments processing
Do your systems and tools fully support agile, transparent,
and profitable business activities or are they impediments?
The rise of the Stoners – when will the world’s most valuable
cash crop evolve from private bi-lateral trades to OTC?
Commodity risk management is now a total supply chain effort. Success will
require agility to respond quickly to the known-unknowns and new
opportunities of the global marketplace.
18
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
5 Key Measures of Optimization In Smart Commodity Mgmt
1. What is your MTM exposure today and everyday –
aggregated and by commodity?
2. How accurate and detailed is your P&L –
aggregated across commodities, by strategy, by
trader, by vessel?
3. How closely do cost estimates match cost actuals
and what are the trends?
4. How long is your monthly financial closing process?
5. Do you have the comprehensive reports you need,
when you need them, to understand your risks and
execute profitably in response to market signals?
Ask yourself how efficient is your organization to manage and profit
in the reality of competitive global commodity markets…
…if it takes more than five minutes to respond, ask yourself why.
Daily Exposure Data
Detailed P&L
Trending Information
Efficient Processes
Risk Awareness in
Decision Making
19
© 2014 AXCELERUS, LLC. All rights reserved.
Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014
We are an advisory practice, led and staffed by people with experience in global
commodity markets. We specialize in technology, process, risk advisory, and
regulatory compliance solutions for companies who transact, regulate, and/or
make significant profits via commodities. We have deep competency across all
commodity classes, agriculture, energy, metals, and financial.
AXCELERUS is currently comprised by 3 principal partners from consulting and
industry backgrounds with a combined total of over 60 years of experience in the
following:
We are your Trusted Advisors:
From strategies to projects, we are the experienced commodity transacting and
risk management advisors you need.
StrategyRisk
Management
ETRM/CTRM
Technology
Project
Management
AXCELERUS: Who We Are
Eka Smart Commodity Management
Eka Agriculture
www.ekaplus.comwww.ekaplus.com21
Timeline – ETRM to Smart Commodity Management
1990 2003
2003
2014
2008
2008 2014
ETRM
Energy Commodities• Oil• Power• Natural Gas
Additional Commodities• Ags• Metals• Biofuels
Broader Footprint• Supply Chain• Compliance• Manufacturing
Data to Foresight• Predictive Analytics• Visualization• Optimization
CTRM
CM
Smart CM
www.ekaplus.comwww.ekaplus.com
Eka Software Solutions: Company Profile
Position: Global leader in on premise & cloud served Smart Commodity Management solutions
Founded: 2004
Employees: 315
Global Offices: 7 offices. 3 development & support centers
• Americas: Stamford CT HQ, Calgary AB
• Asia Pacific: Bangalore India, Singapore, Adelaide & Perth AU
• Europe: London UK
Investors: Silver Lake Partners - GP Group - Nexus Venture Partners
Customer Base: >50 leading global enterprises on 4 continents• Cargill, Rio Tinto, Mitsui, Bunge, BMA, EDF Trading, Graincorp, Viterra, Louis Dreyfus, Noble,
CBH, Mitsubishi, Pinnacle Foods, Twin Eagle, Boliden, Tata Steel
Solution: InSight Commodity Management (CM) Platform• End to end financial and physical transaction management• Cross asset trading and position management – Ags, Energy, Metals, and Bulk• State of the art enterprise risk management
Commodity Analytics Cloud• Analytics specific to commodities• Multiple data sources internal and external to Eka• Prebuilt and custom apps
22
www.ekaplus.comwww.ekaplus.com 23
Customers
A G R I C U LT U R E
M E TA L S & M I N I N G
E N E R G Y
www.ekaplus.comwww.ekaplus.com
Perth
Global Market – Global Customers – Global Engineering & Support
Singapore
London
New York (CT)
Adelaide
Development & Support Centers
Bangalore
Eka Offices
Calgary
24
www.ekaplus.comwww.ekaplus.com
Intelligent. Integrated. Innovative.
www.ekaplus.comwww.ekaplus.com
www.ekaplus.comwww.ekaplus.com
www.ekaplus.comwww.ekaplus.com
Functional Map
Origination Grownet Physical Trade Management Derivatives Risk Analytics General
SetupGrower Mgmnt
General Features
Trans-action
Mgmnt
Physical Trade
Logistics InventoryCOG-M2M-
P&LSettlement
Commodity Derivative
Derivative P&L
Risk Limits/
Exposure
Stress Testing
Derivative Analytics
Fx & Cash Flow
Analytics
Grower Analytics
P&L Analytics
Position Analytics
Alerts & Reminders
Market Data
Grower Acquisition
Setup
Grower Cash
Payments
Portal User Account
Management
Delivery, Invoice, Payment
Allocating Sales to
Purchase/ Stock
Back To Back
Movement
Discrete & Pooled Stock
COG A/R & A/PBroker
Management
Commodity Derivative
P&L
Counter Party Risk
Stress Testing
Reports Reports Reports Reports Reports AlertsCommodity derivative
prices
Grower Profile
Grower contracts
Online contract writing
Contract Amendment
& Cancellation
Processing and
Blending
Negative Inventory
Physical M2M and Unrealize
d P&L
Cost Accruals
Exchange support
FFA Trade P&L
Credit RiskWhat-If Trades
Domain Domain Domain Domain Domain
Alerts/ Reminder Managem
ent
Freight Derivative
Prices
Price Setting & Publishing
Grower Deliveries
Portal User
Requests
Contract Approval
Flow
Commodity Movement
Order
Stock Holds
Realized PNL
Credit & Debit Notes
Hedge Allocation
To Physicals
Fx Trade P&L
Derivative Trading
RiskVaR Dashboard Dashboard Dashboard Reminder
Fx & Interest
Rate
Interaction with
Grower Portal
Grower Pool
Payments
Published Price Sheet
Contract Capture
Documen-tation
Stock Insurance
Monthly Costs
Instrument Support
FFAMarket
Risk
Loans to Grower
Contract Confirmation
Flow
Domestic & Export
Movement
Stock Swaps
Payments &
ReceiptsMargins
FxForwards, Options
Risk Limit Setup
Pool EPR/ Equity
Contract Price Fixing
Internal Movement
Stock Transfor-mation
Prepayment
Invoicing
Options Valuation
Settlement
Risk Measure Tracking
Basis Manageme
nt
Ocean Freight
Management
Weight Adjust-ments
Provisional & Final
InvoicingSettlement
Trade Capture
Ticket Handling
QuotationsTrade
Capture
Trade Managem
ent
Title Transfers without
Movement
Secondary Costs
Trade Managem
ent
Weight Finalization
Washouts, Strings, Circles
www.ekaplus.comwww.ekaplus.com29
Typical Process Flow
Credit Risk
Market Risk
Trade life Cycle
Operations Risk
Business Intelligence
CP Limit
Trader Limit
Quality Deviation
Accurate costs for M2M
Real-time Pos
Real-time PNL
SimulationWorkflow
Component PNL
Signed/Unsigned Alerts
Pending ShptAlerts
Pending Price Fixation Alerts
Contract
Quality PD
Est. Costs
Der. Hedge
Ship. Inst
Recv. Shpt
Cost Accruals
AP Invoicing
Sales Cont.
Allocation.
Sales Planning
Sales Delivery
AR Invoicing
Payments
Overfill/Underfill
Over/Under accrual correction
Overdue Payments
CP Limit
Stop Delivery
Update Credit Risk
M2M Exposure
Flat Price Risk
Basis Price Risk
M2M Exposure
Unhedged Pos Risk
M2M Exposure
Flat Price Risk
Basis Price Risk
Hedge corrections Leverage on
tolerance
Overfill/UnderfillUnallocated contracts
PNL Attribution
Trade PNL
www.ekaplus.comwww.ekaplus.com
Strong P&L Analytics
Unrealized Open
Contract P&L
Realized P&L
Component P&L
Combined P&L
Allocated P&L
Trade P&L
Top /Bottom 5 P&L trades
On Demand
P&L
P&L Attribution
Realized but not price
fixed
P&L By Counterparty
P&L by Trader
Month End P&L
M2M Exposure by
Counterparty
P&L By Product
Customer/ Supplier
Analytics on P&L
Loss Limit Valuation
Simulated P&L
P&L Trend
www.ekaplus.comwww.ekaplus.com
Global Risk: Empowering Best Practices
Eka.Risk
DECIDE: Configure A Risk Policy
SET: Set Limits by Dimensions
ACT: Monitor and Alert
Decide Best Practice Risk PoliciesManagement can define policies on which risks need to be covered across the entire organization.
Set Limits by DimensionsDefine quantity or monitory limits across multiple dimensions such as profit center, customer, corporate, strategy, line of business and commodity.
Act on RisksEmpower corporate users to monitor and act on Managements Risk Policies by monitoring breaches.
Senior Management & Executive Levels
Risk Managers and Business
Heads
Permissioned Users
Single, unified access to all risk information across all
businesses.
31
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Global Risk: Configurations
Functional Limits
Quantity LImits
Daily Contract Limits
Limits to buy at a price
Don’t exceed Unpriced quantity
Don’t exceed priced
position
Value Limits
Don’t exceed contract
value xxx#
Loss Limitation value for
realized P&L
Value at Risk
P&L Limits
Physical M2M
Derivative M2M
Credit Limits
Open Contracts
Stop Deliveries if credit limit
not available
Organizational
Structure
Corporate-1
PC-1
Commodity-1
Commodity-2
Corporate-2
Corporate-3
CEO
VP-1
Trader-1 Trader-2 Trader-3
VP-2 VP-3Group it here
Receive Alerts at these levels
1
2
3
Setup Risk Policies
32
www.ekaplus.comwww.ekaplus.com33
Summary
Single
version of truth
High functional fit
Leverage on Enterprise
Web based solution for multi user accessibility Integration with ERP & Accounting sys. Electronically store the documents Email output documents from the system Extensive reports on Position, P&L, Exposure
eliminates use of EXCEL Global consolidation for reporting and risk
management
All commodities in one system All Business Units: Origination |Processing |Trading Well defined workflows for seamless data flow Good coverage on physicals and derivatives Advanced Risk Management Real-time analytics for decision making
Very high product fit Global Risk Management specifically for
commodities User configured reports, alerts & reminders Heavy focus on analytics Leading next-generation Smart CM
www.ekaplus.comwww.ekaplus.com
Intelligent. Integrated. Innovative.
www.ekaplus.comwww.ekaplus.com35
• S top the information Olympics - gain confidence in the data
• M onitor coverage in real-time and understand needed actions
• A nalyze performance versus market
• R un real-time, complex simulations and scenarios
• T rack variances from budget and forecast
• C ompare suppliers performance vs. plan and forecast
• M anage with real-time or near real-time decision making information
Compliance / Risk PolicyBenefits
Eka Delivers:
USATwo Harbor Point Square100 Washington Boulevard,Stamford, Connecticut 06902United States of AmericaT: +1.203.810.4250
EUROPE2 Sheen RoadRichmond , TW9 1AEUnited KingdomT: +44.208.973.2683
AUSTRALIALevel 5 185 Victoria SquareAdelaide 5000 SA AustraliaT: +61.0.4479.77831
SINGAPORE17 Phillip StreetGrand Building 05-01Singapore 048695Tel No: +65.8363.2635
INDIAEmbassy Tech Village, Phase IIAster Building 2A, East TowerDevarabeesanahalli, Outer Ring RoadBangalore 560 103 IndiaT: +91.80.40819200
CANADASuite 730, 734 - 7th Avenue SWCalgary, AB , T2P 3P8T: +1.403.237.7740
Download Webinar Recording:
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