How to improve asset turnover in metals trading

In today’s highly competitive environment, metals traders are fighting against “the relentless erosion of profit margins”. To add to these systemic challenges, geopolitical risks such as trade wars, sanctions, tariffs and the ongoing impact of COVID-19 (Coronavirus), are increasing uncertainty, reducing demand for some materials, supply for others and creating longer-term logistics issues that will continue even if the virus is brought under control.

With the margins on each trade squeezed almost as tight as they can go, metals traders need to find other ways to improve profitability if they are to remain competitive in the long term. One way to increase profitability without changing profit margins is to increase the number of deals carried out.

Improving asset turnover and thus the number of deals has long been a priority for traders, and can be one of the reasons why organisations consider implementing new CTRM systems. Commodity management technology can provide significant improvements in asset turnover, but (as with any digital transformation project), technology alone does not deliver business outcomes – it also requires a change in processes and mindsets to be truly effective.

This article is an excerpt from Gen10’s whitepaper on asset turnover in metals trading

Turnover through collaboration

Many of the most time-intensive processes are those that require multiple teams’ input. Whether it is a trader waiting for the finance team to confirm whether a counterparty has sufficient credit available or an operator needing further information from a trader, these delays have a cumulative impact on the time taken to complete the trade. As well as meaning credit lines are tied up for longer, these delays can have a negative impact on customer service and mean that team members waste time checking the status of deals, following up on requests and understanding what has gone wrong when issues do inevitably occur in these manual processes.

Improving the flow of information between teams enables better collaboration; it allows individuals to understand the wider context (e.g. a counterparty’s open contracts or outstanding payments), it helps teams understand whether actions are outstanding and it can provide a more transparent way of working that prioritises business results as a whole over the objectives of a single department. And better collaboration means that individuals can act faster, contracts can progress more rapidly and asset turnover is increased.

The collaborative challenge: changing mindsets

Improving asset turnover whilst maintaining tight risk controls enables almost all business departments to move closer to their goals, but collaboration can meet with some resistance initially as it does not always appear to be supporting these objectives. Better data-sharing between teams relies on this better data being actually available, and for busy traders and operators, taking the time to log information that benefits other departments can seem like a chore.

Collaboration therefore requires a change in mindset. You may find it useful to promote the wider strategic advantages and end goals of the collaborative initiative to improve buy-in – it’s important to remember that the goal of collaboration is allowing individuals to do more with the time they have.

When reviewing processes to make improvements, buy-in may be easier to generate if the people whose activities will change are consulted and included in the project from its earliest stages. It is important to understand where the points of friction are in your existing processes, what people need to be able to perform faster and any information they would struggle to share or would not find useful. As well as providing opportunities to streamline processes, this questioning can help identify and overcome objections so that all teams are able to gain the greatest benefit from collaboration.

Technology to support a culture shift

As with any digital transformation, once a goal has been set, it is time to assess which technology is best able to support it. At Gen10, we believe that commodity management technology is the best enabler of digital collaboration. This technology is highly flexible and tailored to your unique processes. Unlike a traditional CTRM, commodity management technology allows you to automate the flow of transactions through your business, from initial contract creation, through approvals and logistics to end delivery and invoicing.

This end to end processing means that all departments can use the same information once it has been entered, with no need to copy or re-type information. And because of the collaborative nature of commodity management technology, this information can be automatically shared across different systems too, including older CTRMs, ERP and reporting systems.

One example of how automation accelerates the flow of contracts whilst maintaining strong risk controls is by sending contracts to the appropriate person for approval and preventing further actions until that contract is approved. Approvers are automatically notified when they have actions to complete and they have a real-time overview of every contract’s current status so that they can identify any bottlenecks and ensure no actions are missed, for a faster turnaround. These automations and efficiencies occur throughout the entire business, including automatically creating shipping documents and invoices, and preventing shipping if mandatory documents are not included.

Collaborative automation can also be used to improve your processes. For example, legal teams can pre-approve contract templates and finance teams set pre-approved credit limits for each counterparty that reduce or remove the need to check every detail of the completed contract. And because the technology includes risk controls and automation, there is less risk of a contract accidentally being worked on further down the line without approval.

Automation also means that information is being updated within the commodity management app in real-time, often without even the need to click a button. This allows all teams complete and secure access to all the information they need to carry out their part of the process, with less need to clarify information, fewer opportunities for error and less risk of delays between teams.

Using commodity management technology to support a collaborative transformation promises a wide range of benefits to all individuals. Each team is able to carry out their activities faster, and equally importantly, is able to reduce the time spent waiting for others, discussing contracts between teams and tracing information errors. All of these benefits add up to faster contract processing and the opportunity to increase asset turnover whilst reducing manual workloads.

Explore how you can drive asset turnover through digital collaboration in more depth, and the benefits to each team within your business in Gen10’s whitepaper – just fill in your details to download your copy now: