THE PHYSICAL CHALLENGE
Commodity Logistics
Physical commodities require the management of deliveries (waterborne and overland) that are critical for profit maximisation – providing accurate, fast and complete solutions for schedulers, risk managers and senior management with a view to full accounting and regulatory control and reporting. With over 90% of the world’s traded goods transported by sea, a critical component of successful supply chain management is the ability to manage vessel operations and freight rate volatility. Triple Point Technology (TPT) – the winner of the 2010 Commodity Business Awards Excellence in Commodity Logistics category – has differentiated itself from most other CTRM software providers by enhancing its functionality with a shipping solution that works with its commodity trading and risk management platform, Commodity XL. Commodity XL’s advanced solutions for scheduling, logistics, and commercial vessel operations manages the unique operational requirements of power, natural gas, liquids, bulk, and packaged energy and commodities. These solutions supply real-time information
to traders, schedulers, risk managers, and administrators to successfully manage commodity and freight volatility and ultimately ensure a profitable supply chain. TPT’s shipping division now serves over 80 blue-chip clients and more than 2,500 users throughout North America, South America, Asia, and Europe. TPT is successfully claiming market share with a diverse group of commodity houses, energy companies, industrial manufacturers, consumer product companies, and ship owners/operators that have selected TPT to manage the supply and distribution of commodities via ocean-going vessels.
For more information on the Commodity Business Awards:
www.CommodityBusinessAwards.com
even years for legal departments and advisors, delays which can obviously have a knock-on effect on liquidity. In the LNG market at least, things look set to change following the LNG DES Master Sale and Purchase
Flexible CTRM Systems There is no one-size-fits-all approach to handling
physical commodities within a CTRM system. Companies have a variety of options based on their particular strategy and the extent of their intended involvement in the market. For organisations that are making their first
tentative foray into the market, integrating physical commodities into their existing infrastructure may represent a more cost-effective short-term option than investing heavily in a new system. For more active players in the market, on the other hand, a new system architecture can often represent the best way to manage the increasing operational complexity that comes with higher trade volumes. Organisations at this stage of the development
may find that a single CTRM platform represents an effective way to handle the complexities of physical commodities. However, some traditional platforms are still relatively weak in this area and so companies looking to dive deeper into physical commodities might prefer to take a new system designed to handle physical commodities. Of course, if that option is chosen it must be able to function alongside other systems, with the ability to be seamlessly integrated into the organisation’s enterprise-wide trading system for consolidated reporting.
Frontline Knowledge Indispensable The choice of platform is not the only consideration
when it comes to dealing in physical commodities. This is a specialist area that requires specialist knowledge. People working within the operations area have a different perspective on the market. As the heaviest users of the system, their frontline experience of the day-to-day minutiae gives them access to valuable knowledge. Organisations are increasingly seeking to enhance performance, guaranteeing compliance
A far more sophisticated approach to value chain optimisation is now the order of the day ...
Agreement for spot transactions from the European Federation of Energy Traders (EFET). Industry insiders believe that more standardised contracts should open up the LNG market to new players and facilitate back-to-back trading.
60 December 2010
by establishing a coherent overview of their trading activities. A far more sophisticated approach to value chain optimisation is now the order of the day, with assets treated as elements in a single diverse portfolio, rather than separate asset silos. Above all, today’s portfolio requires integrated thinking to close the gap between optimisation and risk management. With investors of all types engaged in the
relentless pursuit of profit opportunities, many will rush to ride the wave in physical commodities. In a market epitomised by its
complexity, the successful among them will be as serious about investing in their trading systems as they are about investing in physical commodities. •
Stuart Cook & Richard Philcox are Senior Managers at Baringa Partners.
www.baringa.com
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