Commodity traceability relies on all organisations within a given value chain managing and sharing data effectively. Organisations need to assess what data they will need and how they will access it as consumers and counterparties expect more data points over time. But first they need to ensure they have the processes in place to manage this expanded data flow across their operations.
In part one of this mini-series of articles, we discussed why you need to step back and consider what data you will actually need, as well as where the gaps in your current data processes are making your trading operations less efficient. In part two, we discussed the different options for importing new quality data into your system and how to verify and validate it. Today, we round off the series by exploring how your commodity management system impacts your ability to manage these data projects.
Audits are essential
Traceability data is meaningless if it is not verifiable. Therefore, any commodity traceability projects need to consider how they will audit and verify the information they are reporting on. This may include establishing a reporting framework and scheduling audits. But it’s also important to consider how to introduce real-time auditing that provides assurance in the moment if there is a query regarding the provenance of any stock.
This is where the software you choose can have the greatest impact. If you are using a good Commodity Management system like Gen10’s CommOS, this audit is automatically created for you. Using CommOS, every time an action is taken, such as stock being blended or allocated to a shipment, the digital audit trail is automatically updated. Every process and transformation down to the bale, bag, or coil is recorded and can be easily traced back to the data entering your system. This audit trail is automatically created as people carry out their role, with no additional administration, which means that you don’t need to worry about omissions or human error in the audit data.
Build for flexibility
Many commodity traceability projects arise from a need to demonstrate or improve the organisation’s sustainability initiatives. And sustainability is an area where data flexibility is essential.
The data that is needed can change with little notice due to new legislation, partners’ sourcing policies, market standards, and more, and there are often new developments on the horizon. It is therefore important to ensure your traceability processes will meet the data needs of your organisation and your buyers in future as well as today. Even when you are not sure what these data needs will be.
We have already discussed the importance of ensuring your commodity management system is flexible in how data can be uploaded or imported into the system in part two. This allows your organisation to respond to changing requirements without another large system implementation or large development project.
And better traceability will likely also mean that you need flexibility in your commodity management system’s workflows. As sustainability data improves, it typically becomes more commodity-specific, meaning that one commodity trading firm may need to manage several related but distinct traceability processes. This means that any traceability software you use needs to be flexible enough to work with a range of different commodities each with their own unique workflows. It also needs the flexibility to adapt as industry standards and your own requirements evolve over time.
Organisations using CommOS already have this flexibility built into their commodity management system. Our flexible cloud model has enabled us to customise CommOS for over 100 different commodities on the same cloud system. Clients only see the commodities that are relevant for them and customise their own unique workflows without any system development. This flexibility means that CommOS can be adapted for each client as their unique data processes evolve over time.
The rewards are worth it
Commodity traceability is certainly a challenge, and even worse, a challenge where the goalposts keep moving. But the opportunities that arise from implementing an effective traceability programme make it worthwhile.
Effective traceability means better and verifiable compliance both on the legal side, such as for sanctions compliance, but also with value-adding commodity certification schemes. It enables clear product differentiation without extra administration so that your traders can realise the full value of any premium cargo and operators can easily assign stock with the correct quality information.
This product differentiation can also allow your organisation to enter new markets, such as for certified cocoa or low-carbon aluminium, especially if your commodity management system also helps you to efficiently manage OTC contracts.
Ultimately, better traceability means better quality data. And this improved data has a wide-ranging impact on any business’ operations. To improve both traceability and commodity trading, your people need to manage all trading data in an environment where it is instantly and seamlessly available to the people who need it, with a single source of truth so that all team members have a complete overview of all your positions. This leads to faster processing, fewer errors, and more effective operations, across the entire organisation, from creating contracts and sales documents to allocations, risk management, and reporting.
Despite the belief that traceability is only relevant for ESG purposes, it plays a core role in commodity operations right now and is only set to become more important in future. If data management is a weakness that is holding your organisation back, now is the time to make it a priority.
Speak to us today to find out how we can help.
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