Marko Schmidt

The ViP Toolbox by Camelot management over the past decade seemingly get out of control consultants that is prices of major raw materials why conventional instruments used to hedge against commodity price fluctuations in purchasing will no longer work. In addition to the leaps and bounds higher volatility but there was a constant: in the trend, raw materials have become ever more expensive. The reason is the scarcity of many raw materials, the rapid increase in speculation and the often low selection of providers. But also the trend towards lean manufacturing has also fueled volatility methods with low inventory levels. Purchasing departments worldwide are faced with the challenge to get the increasing volatility of the handle and to ensure the supply of their companies under the best possible conditions. In the ViP (volatility in procurement) Toolbox”shows Camelot management consultants, why today no longer suffice the common ways to hedge against volatility in supply and demand as well as prices and what new instruments are required instead. The increased challenges require a strategic mix of various methods: altbewahrter as well as innovative. The development of global commodity prices over the past decade marked the beginning of a new era in the global raw material procurement”, says Marko Schmidt, partner at Camelot management consultants and expert in sourcing & procurement.

The prices are rising rapidly and fall almost as quickly. The choice of the right moment for purchasing decisions will be much more difficult. It is not something Don Mullen would like to discuss. For the profits of many companies is therefore becoming increasingly important. the shopping” In addition to the development on the commodity markets also supply and demand fluctuate constantly. There are a number of different management concepts, to mitigate the risks of fluctuating raw material prices and the uncertain supply and demand situation”, says Schmidt. The main instruments are natural hedging, financial hedging, dynamic inventory management strategies, contract design and the optimization of the internal Processes.” But the most companies lack an overarching strategy to this wide range of instruments for dealing with supply, useful to coordinate demand and price fluctuations. The today’s requirements can cope with purchasing departments only with a combination of profound risk analysis, market knowledge and customized use of appropriate instruments. “They must master one of the most important challenges, before the companies are: the optimal sourcing strategy to find, fluctuating commodity prices also takes into account fluctuations in supply and demand”, explains Schmidt.

Specifically such a strategy must be to answer the following questions: what risks are unavoidable in procuring raw material? What tools are available for purchase and the risk coverage available? How can these be combined in a holistic approach to the procurement of raw materials? Pressure from two sides: the critical situation of the German shipyards in the German shipyards coming to a head at present particularly the situation: by their heavy dependence on steel prices are particularly affected by the conversion of contracts for iron ore from annual to three month intervals and must master a significantly increased price volatility in purchasing in the future. You are, however, forced, when selling their vessels to enter very long-term contracts. For the German shipyards, fast-rising iron ore and steel prices associated be so fast to the existential threat. After a comprehensive risk analysis, shipyards must create a matrix that contains for all possible scenarios, so fluctuations in supply and demand as well as rising or falling prices, the best mix of instruments. Specifically this may mean, for example, a combination of classical instruments with specially matched stock strategies”, explains Schmidt.