With raw material prices constantly fluctuating, many people in the nutrition industry are wondering if they will ever be able to properly plan ahead for their business.
In an ideal world we would be able to predict trends, changes and movements in the global commodity market to help us prepare for the (near) future. Unfortunately, in reality, accurate predictions, especially short term ones, are virtually impossible to make.
As a protective measure, professionals (that are active in the commodity trade business) contract their most important raw materials for several months in advance. Of course these commitments have a major impact if end product sales are contracted for several months into the future as well. In cases like these it is vital that you can correctly predict the availability and prices of your most important raw materials to limit your risks to a minimum.
Cost price prediction with MILAS
As a software partner for the nutrition industry we help to overcome the many challenges in the forward contracting business process with our industry-standard ERP: MILAS (based on Microsoft Dynamics AX/365 for Operations).
To support our customers in this difficult process we have developed an interesting feature on top of our advanced contract management and commodity and risk management modules. This feature, called cost price prediction, allows users to calculate average contract prices for each given future period and offers additional functionality such as:
- Exclusion of certain contracts (for instance those that were only made for certain straight trade actions, not for production)
- Calculation of landed costs
- Involvement of financial transactions (futures, options, etc.) in the calculation
- Comparison with the market price
Taking Control
As it looks right now it seems unlikely that volatiliy in raw material prices will dissappear anytime soon. Fortunately our customers don’t have to be completely helpless in a situation like this.
If you would like to get a better grip on the fluctuating commodity prices and take control of your contract portfolio as well, be sure to contact us.
