Top Three Reasons Not to Use Microsoft Dynamics NAV for Commodity Management
June 22, 2017
Many commodities companies use solutions such as Microsoft Dynamics NAV and Microsoft Dynamics 365 for Finance and Operations (AX) for accounting, financial management, and other business functions. Some commodities companies even consider using these systems to manage trading and risk.
If this last statement describes your organization, you might be on the verge of making a huge mistake.
While Microsoft Dynamics NAV and similar solutions offer features for handling numerous functions beyond accounting, they are in no way suited for commodity trading and risk management (CTRM). Here are the top three reasons why:
1. They are not equipped to handle the complexities of the commodity value chain. Out-of-the-box accounting solutions are designed for managing standard products at standard terms with fixed pricing. They cannot effectively support the volatile world of commodity trading with its multi-term contracts and fluctuating prices. Accounting solutions also do not allow commodities companies to change orders that won’t be delivered as expected, and make the subsequent needed adjustments for quality, repackaging, transportation and other factors while maintaining traceability.
2. They lack required risk management capabilities. To maintain a competitive edge, commodities companies must have sophisticated tools for managing risk and exposure that address the needs of the finance team, risk managers and executives. Real-time position and mark-to-market P&L across all physicals and derivatives is required for identifying exposures and enabling timely decisions. Companies must also be able to model “what-if” scenarios, measure counterparty credit risk and use hedging strategies to mitigate price risk. Accounting solutions are ill-equipped to meet these requirements. Companies that choose to use them for commodity management are jeopardizing their success and putting themselves at a colossal competitive disadvantage by foregoing tools specifically designed for addressing the price, credit, regulatory and operational risks that permeate the commodities business.
3. They don’t provide critical analytics. All accounting systems provide reporting, and many even go a step further by delivering business intelligence. However, this information does not meet the unique needs of commodity traders and analysts, who require specialized analytics for uncovering insights, optimizing trading decisions and staying on top of market-moving events. To thrive in an era where uncertainty is the norm, commodities companies need trading and risk management systems that provide advanced analytics crafted specifically for commodity markets. Analytics built with deep market knowledge can provide real-time insights into P&L, procurement, risk, and the supply chain that help reduce costs, increase efficiency and boost profits.
Volatile Markets Demand Advanced Trading & Risk Management Solutions
In today’s environment of high volatility and tight margins, companies cannot afford to use their accounting systems for commodity trading and risk management, or its close cousin energy trading and risk management (ETRM) for that matter. Attempting to retrofit an accounting solution to manage the myriad intricacies of the value chain is not a worthwhile endeavor – it’s an expensive, time-consuming exercise that will never deliver all the features and functionality required for successful trading and risk management. Furthermore, internal IT staff will be stuck maintaining the system modifications because customer-specific features are not supported by vendors.
Instead of compromising on requirements, organizations should use an advanced CTRM or ETRM software solution with their accounting system of choice. Selecting solutions with a proven track record ensures a smooth implementation with minimal risk. Many of our customers have had a lot of success using our InSight CM commodity management platform integrated with Microsoft Dynamics NAV.
In addition to seamlessly integrating with Microsoft Dynamics NAV, Eka’s next-generation CTRM and ETRM solutions integrate with other accounting systems including Microsoft Dynamics 365 for Finance and Operations, SAP, Oracle, and JDE to provide real-time inventory information and traceability of every transaction to its associated contract.
Suitable for the agriculture, manufacturing, metals and energy industries, Eka solutions optimize all aspects of the supply chain. Our multi-commodity platform manages physical trading, procurement, logistics, processing, and compliance, and provides “what-if” analysis tools, forecasting tools and advanced analytics that improve decision-making and mitigate risk.