Reports E/CTRM Software – To Build or Buy? | Page 12
CTRM for Ags & Softs
and transformation of ags and soft commodities. These companies, a traditional core business area for ERP vendors, are
now actively encouraging their ERP suppliers to add more commodity-specific functionality, moving these vendors
inexorably closer to delivering fully-fledged CTRM solutions that are fully integrated with all of the other key business
functions covered by ERP. Taken to its logical conclusion, this buildout of functionality positions the ERP vendors to
compete more directly with CTRM vendors in the trading markets. On the other side, many CTRM vendors are adding
supply chain functionality as they seek to move deeper into theags & softs segment, as well. In some instances, CTRM
vendors are making acquisitions outside of their traditional space (e.g., EKA’s acquisition of Matrix) in order to consolidate
their strategy of moving further into the supply chain. It will make for an intriguing battle, the outcome of which is hard to
predict. Will customers more readily adopt a solution that would require custom integration between standalone ERP and
CTRM products; or will they accept less specialization in the TRM capabilities and buy a singular solution from an ERP
vendor?However the battle may be resolved in the long run, ComTech’s outlook is for increased merger & acquisition
activity in the coming months and years in the ags & softstechnology space.
History has shown that many of the smaller ags or softs specific vendors will become stranded, lacking the capital or the
know-how to expand their markets by developing additional functionality or commodity coverage within their existing
products.These companies will instead seek niche geographic or commodity markets where they can excel and grow
within their exiting capabilities. ComTech believes we will continue to see these smaller specialist CTRM vendors being
acquired by the larger vendors in the space in support of a broadening CM strategy.
CTRM versus CM
A CTRM solution provider will naturally focus on a solution that provides full visibility into positions, exposures and the
overall profitability of trading. It may or may not capture other aspects of the supply chain such as movements and
inventory in any great detail, but will rather focus on capturing trades of all types (physical, financial, Exchange-based,
etc.), marking those trades to market, calculating positions, helping manage price and credit risk, and reporting those
results to management.
A Commodity Management solution, on the other hand, will more resemble an ERP solution, focusing on helping to
manage and optimize the supply chain from point of origin to point of consumption. This will include movements, inventory
management, production, processing and much more. Invariably, the solution may focus on contract management and
process costs, as opposed to trading, and may be very weak in the areas of book structure, position management, trade
capture, price and credit risk management and valuation. Simplistically, CM solutions will be better suited to producers,
distributors and industrials; whereas CTRM will be more suited to traders and marketers.
However, it really isn’t that simple. Since almost all the vendors desire a broad (and therefore larger) market in which to
selltheir software, most will offer a hybrid CTRM/CM solution - and how successful the vendor has been at meeting the
requirements of both markets will depend on any number of factors. For this reason, prospective buyers must fully explore
the capabilities of each vendor’s products in some depth.
It Is All About the Commodity
Each commodity in ags & softs has its own unique characteristics that affect the physical production, processing,
transportation and valuation of that commodity. Depending on where a vendor and product got its start, any individual
solution may or may not be able to fully support the unique requirements of any particular commodity. For this reason, we
have included the previously noted Vendor-Commodity matrix as a high-level overview that can be a useful starting point
for potential buyers to identify potential solutions.
However, beyond a simple view of commodity coverage, the capabilities and fitness of any solution for any particular
business will vary. Among the many attributes that should to be considered when contemplating the purchase of a new
CM solution:
Tracking and Valuing Quality Attributes - Specific quality attributes that impact pricing and/or treatment of the
commodity during transportation such as, for example, purity, polarization, moisture content and others. These
attributes must be captured by the solution in an appropriate way (for example, by pile, bag, bale, weight, trade,
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