Commodity management is becoming an increasingly important role within the supply chain community as more and more companies attempt to secure their supplier lines, deliver value for money and develop structured relationships with key suppliers. Although a commodity manager has a clear managerial role within the process, it is the context that the manager operates in as a whole that is significant.
What Is A Commodity?
A commodity is something that is fixed in the sense that it is basically the same, no matter who supplies it.
Common commodities that we are all familiar with include petrol, gas, wheat, coffee (to a large extent), gold and of course, oil, but in effect there are many more.
Commodity management requires a very strategic and robust plan to ensure that both value and risk is managed correctly. Commodity management is in effect a thorough and systematic approach to the usage cycle for any specific group of items. The commodity manager has to look at how a company buys and the patterns of purchasing commodities, then has to ascertain the market forces that apply to the commodity.
So commodity management is about more than simply ‘managing’ commodities or procurement. It is essentially about mitigating the risks within the market whilst running an effective sourcing campaign.
Commodities Management And Procurement
Often the role of procurement manager and commodities manager are very closely interlinked and very often the two roles are combined, so that the person who is responsible for procurement will also be responsible for commodity management. So job descriptions often combine the two roles into one very senior person(s) within the company.
The commodity manager also has to liaise with suppliers to ensure that the supply chain is as stable as possible, so that there is no risk of the supply chain breaking down. Although traditionally this is the role of procurement, this fits in well with the role of the commodity manager.
Thus the role of a commodity manager is extremely complex and it has to be undertaken by someone who is capable of understanding markets, the supply chain, how the business works and so on. It is about far more than simply ‘managing commodities’ it is about mitigating risks, making sure the company survives extreme volatility in commodities and about integrating all the different roles within a company.