Inefficiencies cost trading companies time and money. Over the years, many different technologies have been used by commodity traders to improve their efficiency, just consider the fax machines that revolutionised contract turnaround times! These have since been replaced by even more efficient and better-traceable electronic communications. And as technology advances further, emailed pdf attachments that need to be printed, signed and returned are already being replaced by electronic signatures in some cases.
As areas in the business where significant friction and delay are further reduced by the adoption of technology, those who derive competitive advantage from moving faster are already looking towards the next area where efficiencies can be made and profitability improved. Automation, a significant way to accelerate processes, improve contract turnaround times and create more opportunities for profitability is one next step already available to commodity traders.
CommOS: an example of automation in trading
To appreciate the benefits of automation, it is useful to first understand how automated processes can work.
Automation is a core feature of Gen10’s commodity management apps, used across front-, middle-, and back-office processes. This process automation works from end to end across your organisation, from the time a purchase contract’s details are initially entered, to the logistics that get the goods to your customer and the final invoice. And because every organisation is different, with different processes in place, the workflows that create this automation are custom built for your business.
When a trader or operator enters the details of a new contract, the app automatically populates the contract with other necessary information, for example, the counterparty’s address and can copy the terms of their latest contract, which can be then edited if needed. Other automated areas include calculating weights for multiple shipment schedules on one contract, alerting the trader if a credit limit is close to being exceeded, and the ability to create a sale contract based on its purchase contract.
When the contract is ready, automation sends the contract to your designated approver. This individual is notified by email and can instantly check the details before either sending the contract back to the trader for amendment or on to the next stage, which, unlike in a traditional CTRM, is a highly automated logistics function.
The logistics automation uses the information already entered in the contract to automate shipping and warehousing documents. As well as creating documents from the information provided, the app checks whether all mandatory documents are attached before further processing occurs. It also includes a calendar of tasks and deadlines that update as changes are made to each shipment, notifying the individuals responsible for each action whilst still providing a complete view of all outstanding tasks for the wider team.
Automated workflows progress contracts through each logistics stage
Other automated checks and controls include warnings when allocations breach your tolerance levels (eg. for weights or assays) and automatic conversion between different units. Different scenarios such as trans-shipping, warehousing and transferring cargoes from ships to land transportation can all be managed and automated using Gen10 technology. And if a request for release is needed for financed goods, again the operator will simply be able to trigger the workflow that notifies the appropriate manager in trade finance.
Invoices can also be automated to save time and reduce errors. And because clients often have different requirements, such as decimal places for weights and values, these can be automatically applied for each counterparty. All the contract data is pulled through to create the invoice, including shipments and descriptions, whilst the invoice number and date are generated automatically. Then with one click a pdf invoice can be generated to send to the client.
Automation not only accelerates your existing processes but it can also help you develop more efficient operations that improve compliance whilst reducing manual processing. One example of this is in Gen10’s Contract.Manager app. Here you can store pre-approved contract template terms and clauses that the app uses to automate contract creation. This can drastically reduce lengthy approval processes, whilst maintaining a higher level of risk management. Another example of process improvement is the introduction of electronic signatures which removes the need to print, sign and re-scan documents.
The benefits of automation in commodity trading
There are many direct benefits of using automation in your commodity management processes. The first and most obvious benefit is the speed this provides. Processes that could take hours manually, such as credit limit checks, deal P&L and position reports are now possible in seconds, either at the click of a button or completely automatically.
Removing manual processing also improves accuracy by reducing the risk of errors and omissions that is ever-present when people are typing or copying information. This improvement also saves time that was previously spent correcting mistakes and back-and-forth requests for information between teams.
Automation can also help you improve compliance. It empowers your people to act faster but remain within your processes and risk limits. From warning that a limit may be breached to preventing actions beyond a certain point if a contract has not been approved by the correct individual, risk management processes are supported and enforced by automation. This risk management functionality has further benefits for commodities such as ags and biomass where sustainability certificates need to be traced from end to end across the supply chain.
Compliance reports are also made far faster and easier as data sharing across systems can be automated too. And Gen10’s automated apps provide a complete audit trail of every action undertaken against each trade for comprehensive auditing and reporting.
The wider business benefits
Many organisations would call an initiative that delivers the above outcomes a success, but there is still more to commodity trading automation. The faster contract progression and reduction in errors provides the foundation for a superior customer experience, a key differentiator in a competitive marketplace. And in a similar vein, collaboration between teams can be improved by the automated flow of information, tasks and deadlines that ensure all deals are progressed in a timely fashion through the correct channels and without the need to clarify information. Teams can also have more positive interactions with each other as the reduced risk of things going wrong means that there is less time spent investigating problems.
Ultimately, automating commodity trading saves time, reduces the risk of errors and improves customer experience. These benefits combine to provide a real opportunity to increase profitability.
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