One of the main advantages of a multi-commodity CTRM or commodity management system is that innovations made for one commodity can mean system improvements and better ways of working for all other clients too. That’s why we are proud to share that our CommOS Commodity Manager supports over 100 commodities in one platform.
To demonstrate how beneficial this multi-commodity approach can be, we are taking just one example of an improvement we recently made for a petrochemicals client and exploring how this allows our clients across a wide range of other commodities to improve their own processes too.
The commodity pricing engine
CommOS already had an incredibly complex automated pricing engine that had been developed with our clients to manage highly specialised premium and discount calculations for commodities including for cotton, cocoa, metals and concentrates. However, this needed to be developed further for petrochemicals.
We added the ability to price against multiple exchanges for a single product in one contract. Clients can now combine prices from multiple exchanges in their own ratios to create a market value – all calculated automatically using our powerful Pricing Engine. Clients can then add further complexity to their pricing calculations, including factors (multiplying by a given number), or a premium for a given exchange if needed. And this is in addition to the existing pricing formula options for premiums, discounts, FX, interest and more.
Contracts can also span multiple currencies, again using different ratios as required. So, unlike with some systems, a contract priced across both USD and EUR exchanges can be entered, managed and marked to market as a single contract – with your digital system representing the actual real-world scenario.
The Pricing Engine is also used for real-time Mark-to-Market and P&L calculations. When calculating MTM, the user can decide whether to include the advanced pricing calculations to get a figure across all the contract exchanges, or make adjustments based on one exchange.
Benefits across commodity classes
Whilst our metal concentrate clients already had the functionality to manage their complex contract pricing in one place through automated calculations, they are also seeing a benefit from the new petrochemicals features. A particular improvement is the summary of all calculations that have been included in the pricing, without the trader needing to manually check which calculations have been carried out.
Another pricing innovation for petrochemicals was adding density to weight and volume conversions. CommOS has long had the ability to automatically convert between wet and dry weights, weight units, packaging types and more, but can now also convert between weights and gallons. And these conversions can be applied in either direction at any stage, so if a client wanted to create a contract in tons, ship in gallons and invoice in tons, all of these calculations would be carried out automatically.
The flexibility of our cloud systems means that we can always ensure our clients have the automated conversions they need for pricing during their implementation, but also that they can manage conversions when storing and processing inventory, such as when using tanks or processing cocoa beans into cake, liquor or butter. These latest additions to our flexible conversion calculations demonstrate this ability to support our clients’ unique processes within a single commodity management system. And whilst CommOS already supports over 100 commodities, having these conversions already set up means that we can onboard clients in new commodities even faster.
New and existing clients benefit
The work we have done during this project helps our existing clients get even better use out CommOS and provides the opportunity for us to discuss how system improvements based on other commodity processes could help them manage their own assets.
It also means that our signature rapid implementations can progress even more quickly in future as these pricing developments can be customised to any new client, whether they trade in the commodities that we already support or in new markets. All Gen10 technology is as flexible and customisable as possible, both demonstrated by, and improved by, the pricing developments we have carried out in the petrochemicals field.
If you’d like to find out more about how our flexible approach leads to faster implementations, or you would like to know how it could be applied to your own commodity trading processes, get in touch with us today.
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