Reports E/CTRM Software – To Build or Buy? | Page 9

CTRM for Ags & Softs
favor of a ‘commodity management’ approach. Commodity management means approaching price exposure more like a
trader tracking price movements, utilizing hedging and other risk mitigation tools and measuring performance against
market as opposed to budget or forecast. It’s this adoption of a “trading”-centric procurement process that has led to the
expansion of CTRM software solutions into particularportions (logistics, inventory management) of supply chain
optimization and deeper into commodity management.
Of course, while all of this evolution and change was going on in the commodities markets, a lot of change was also going
on in technologies. Vendors have adopted newer web-centric technologies and applied them to improve the user
experience. Additionally, vendors have increasingly made their solutions more modular to enable buyers topick and
choosethe capabilities they need within the vast common CTRM footprint. Further, by using more modern technology
tools and platforms, the latest generation of CTRM solutions are now more configurable and personalizableto improve
implementation timescales and the user experience with the software. These new technologies have also been used to
improve data visualization, making data and information more quickly consumable and improving productivity. Finally,
these newer architectures also improved the performance and connectivity of the CTRM solutions making them easier to
interface or integrate with other software solutions and various data feeds.

Commodity Management
Commodity Management is an emerging application area that is significantly broader than CTRM in
some respects and has, at least until now, cateredprimarily to a large group of entities that don’t really
‘trade’ commodities, but instead procure, process or sell them. As Commodity Management has
gained acceptance in the market, the term is increasingly used to describe the entire breadth of
processes involved in handling commodities, including trading and risk management to the point
where CTRM software is essentially becoming a subcategory of Commodity Management. This
evolving terminology is causing some confusion in the market.
Historically, Commodity Management emerged as a set of business processes related to the handling of commodities in
the context of supplier-relationship management and procurement in entities that essentially utilized raw materials and
created finished goods. To that end, it could naturally be seen as an extension of ERP as it included managing supplier
relationships, inventory, movements/supply chain, accounting, purchasing, processing and so on. As commodity and raw
material prices became more volatile and as more regulatory oversight was introduced into commodity markets, many
manufacturers and commercial packaged goods companies slowly began to look into hedging strategies for price risk
management. Such activities required functionality not usually included in an ERP solution and were perceived to offer
competitive and strategic advantage. CTRM software, however, did offer risk management and derivative trading
functionality and was often selected as an add-on to the ERP solutions already used in house. Meanwhile, banks, funds
and merchant traders were increasingly tradingags, softs and related commodities in a more diverse portfolio of natural
resources helping spur the growth in the market for ags & softs-focused CTRM solutions.
Producers have also historically required software to support their activities, including selling and storing their production.
An entire range of specialist solutions have sprung up to support various types of producers including seed management,
inventory management and so on. And with the increasing consolidation of the producers in North America and Europe,
and the verticalization of the markets driven in large part by global merchants, producers have also begun to procure
software ranging from true CTRM solutions through to Commodity Management extensions to ERP solutions and
everything in between.

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