Can Enhanced Commodity Management Decrease the Cost of Christmas Cookies?
December 20, 2018
Whether your preferred indulgence is pecan pie, gingerbread cookies, or cupcakes, chances are it includes an international mix of ingredients. Sugar, flour, fruit, chocolate and dairy products are procured from all over the world. These ingredients need to be grown, marketed, transported and eventually sold to you so you can bake your favorite cookies.
How do commodity management improvements help you pay less for your cookies?
Growers can use IoT sensors, big data analytics and Digital Commodity Management (CM) to increase yield and cut costs. Analyzing real-time data on plant health, soil health and moisture levels lets growers know exactly which plants need fertilizer, water, and pesticides. This improves the output from each acre of land and keeps the use of expensive fertilizers and clean water – often a scarce resource – to a minimum.
Advanced weather analytics provide weather forecasts specific to a location and time, enabling farmers to plan for unusual weather events. When growers are more prepared, less crop damage occurs.
Digital CM’s blockchain technology lets farmers trace crops across the entire value chain, from farm to fork, ensuring that consumers, retailers, and manufacturers know exactly where their ingredients came from and how they were sourced. If a crop is recalled, action can be taken quickly to replace contaminated food from the value chain, reducing supply disruptions and ensuring consumer safety.
Traders need to purchase commodities from growers and sell the products to manufacturers who package it for sale in your local markets. Digital CM enables real-time digital collaboration, so traders know exactly which contracts are open and what prices are available. Using Digital CM, traders make the best purchase and sell decisions, reducing raw material costs.
Because Digital CM connects the entire value chain in real time, traders have insight into both supply and demand for crops and can ensure all contracts are filled on time and at the best price.
At the same time, manufacturing procurement teams use Digital CM to make sure they buy their ingredients from the right supplier at the right time and at the right price. Its advanced analytics help buyers spot and respond to demand trends, so they can make better planning and purchasing decisions.
Procurement managers use Digital CM to determine which contracts make sense. Is it more cost-effective to buy sugar from Brazil (which might be cheaper to buy but more expensive to deliver) or to buy more expensive sugar from the EU and spend less on transport costs?
They also use Digital CM to optimize logistics, storage and transportation costs as well. Is it better to store materials in Ohio or move them to Tennessee? What are the optimal routes for moving raw materials?
When transport, warehousing, and other logistics are optimized, buyers can shorten the time to market for seasonal goods, cut expensive waste, and avoid rent for unnecessary storage.
Manufacturers, growers and traders that embrace a digital edge and upgrade to Digital Commodity Management cut costs, operate more efficiently, and improve partner relationships. And, we, as consumers, spend less for our Christmas cookies.