One of the biggest challenges for commodity traders is to bring supply and demand together. If an agricultural commodity such as milk, for example, is not transported to a food manufacturer that needs milk as an ingredient, then the results can be catastrophic for that business. Traded commodities, therefore, can only be profitable if they are made available in a timely fashion and transported to locations where they are needed.
In order to ensure that an in-demand commodity is transported to its destination in time, businesses need precise supply chain management. Read on to find out more about this key aspect of commodity trading and how Kimon International makes supply chain management a cornerstone of its practices.
The Three Key Aspects of Supply Chain Management
Effective supply chain management requires an understanding of Location, Expediency, and Condition. If any of these three elements are not taken care of properly, the supply chain collapses. The result? Wasted produce and massive financial losses all round.
Location refers to where a commodity is and where it needs to be to meet demand. Expediency covers the speed at which a commodity must be transported in order to meet demand and to remain unperished. Finally, Condition refers to the processing required to make a commodity useful and viable.
Location: Flowing from Supply to Demand
Think of commodity trading as a river. It is a commodity trader’s role to ensure the river flows, from the river’s source to its final destination. If, for example, nitrates are required to make fertilizer, then those nitrates must be transported to where the fertilizer is being created. The manufacturer of the nitrates must be able to move its product to the buyer, the fertilizer manufacturer.
This movement of products from source to destination can happen locally, nationally, and internationally. With an increase in distance, comes an increase in the logistics necessary to ensure a product is moving freely, regularly, and without difficulty. This is why supply chain management is key.
Expediency: Time Matters in Commodity TradingTime is always of the essence. This is truer in commodity trading than in most areas. The reason for this is that raw materials perish over time. It is also the case that manufacturers need shipments of commodities within a specific time frame in order to maintain their production rate.
Adequate storage is critical. If a food ingredient will perish, then it must be stored with the correct humidity, temperature, and air exposure. Supply chain management involves ensuring that commodity producers, especially within the agricultural sector, are using the right storage equipment for shipment.
Regardless of the storage process used, all products will perish eventually. This combined with the need to deliver commodities on time means expediency is essential.
Condition: The Form of the Commodity is Everything
This applies to most sectors, including energy, mining, electronics, and especially agriculture. Commodities must be processed to specific standards in order to be both useful and legally safe.
Many products are considered raw. This means that they have not been processed yet. For example, wheat needs to be milled before it can be used to make flour. Milk needs to be skimmed before it can be used as a low-fat ingredient. Soybeans need to be crushed in order to make vegetable oil or feed livestock.
Supply management for commodity traders means ensuring that produce is processed to be useful, while stored in a safe way so that it adheres to regulations. If either of these aspects is not taken care of, then the produce can go to waste, be disposed of, or be undesirable for purchase.
Kimon International and Supply Chain ManagementAs expert agricultural commodity traders, Kimon International prides itself on not only bringing producers and buyers together, but in overseeing the supply chain at all stages of development.
From harvesting to processing, to practical application, Kimon International ensures that traders, producers, and investors are all taken care of to the betterment of all. This is all achieved with a dedication to sustainable agricultural methods which deliver safe food and other agricultural materials to the world, feeding billions and employing millions in every region.
For more information about Kimon International trading and its supply chain management, contact one of our experts today.