A European Power Trading Firm wanted to establish a US business desk. The client used an ETRM system domestically and a homegrown system for their ISO transactions however faced a notable challenge due to the lack of standardization. Users resorted to manual database updates domestically which led to inefficiencies and a heavy reliance on manual ways of data consolidation and system operations. The absence of automation added to these issues, necessitating a comprehensive solution to streamline processes.
$2 Million
Resource Cost Savings
Implementation of up to 7 products
500
Hours Saved
Implementation Effort Behind Each Product
20%
Time Savings
Daily Operations and Reconciliation
To optimize and enhance operations; we performed a comprehensive software evaluation. We proposed a dual-system approach to have – an ISO Bid to Bill solution for transactions with ISOs and an ETRM system to handle Exchange, Bilateral, and Environmental (Non-ISO) trades. The following features our process for recommending the solution.
Our comprehensive Software Selection process ensures a complete study of the business operations. Workshops help us to understand the key requirements of business operations to design a process map and conduct a gap analysis. With industry-experienced team members, we understand future business needs, playing a vital role in software selection services.
We advised upgrading their current ETRM system for managing non-ISO transactions and implementing an ISO Bid to Bill solution for transactions with ISOs. This approach is tailored to provide the client with an efficient trading infrastructure that meets their specific requirements.
Performance Challenge The zenith of a company’s CBOL’s journey converges with a pivotal juncture during the software selection phase. This crucial phase aligns seamlessly with
Performance Challenge A well-known chain of gasoline service stations located across the Southern United States was facing several security issues along with severe data corruption
Business Challenge A multi-state U.S. electric cooperative and its subsidiary required more powerful recording and calculation of the financial and physical risk associated with power
Customize & improve business processes with Value Creed’s Services
In today’s rapidly evolving commodity landscape, the quest for trading strategy, precision, and having the right tools at your disposal for efficiency is paramount.
Whether your organization is in its infancy, grappling with growth challenges or aiming to diversify into new industry sectors, the strategic design and foundation of your business processes are essential. In this blog, we delve into why business process design is your secret weapon in the world of commodity trading and how it can transform your operations. We will also pinpoint when it’s time for a redesign.
Business Process Design is the foundation of success in Commodity Trading and Risk Operations. Its importance can be broken down into key principles that strengthen a company’s competitive position in this complex field.
Efficiency reigns supreme in the world of commodity trading and risk operations. The meticulous coordination of processes can mean the difference between profit and loss. With well-designed operations, you'll be able to execute trades with the strategic precision, reducing operational errors, and optimizing every crucial opportunity to enhance profitability.
Risk management is at the core of commodity trading, beating like a steady heart. In this dynamic world of price swings, supply chain hiccups, and global complexities, a robust strategy is essential. A well-crafted business process design blends together thorough risk evaluation, effective risk reduction, and vigilant monitoring, serving as your protective shield to spot and skillfully navigate potential dangers.
Compliance forms the bedrock of ethical and legal stability in commodity trading. Diverse regulatory requirements, varying by region and commodity type, demand meticulous adherence. Business process design serves as a compliance compass, guiding your operations through the labyrinth of regulations and ensuring your business avoids the pitfalls of non-compliance, financial penalties, and legal entanglements.
In summary, a well-designed business process seamlessly integrates with existing systems, and workflows, while also defining how these processes interact with each other. Meticulously crafted processes foster better coordination and synergy across the organization, leading to improved overall efficiency and productivity. Additionally, it enhances visibility, providing near real-time access to information facilitating swift decision-making, and identifying any performance or compliance gaps.
Commodity trading organizations progress through distinct phases in their lifecycle. We have used CBOLTM as a guiding framework to gauge whether a company is in its early formation and maturity stages or experiencing significant growth, either through organic expansion into new markets or via inorganic means such as acquisitions. In both scenarios, it is imperative for companies to assess and potentially adapt their business processes, albeit for different reasons.
When a company finds itself in the formation and maturity stages, it often grapples with resource limitations. Consequently, its processes must factor in the expertise gap and the technological challenges inherent in managing complex ETRM systems.
Conversely, in the case of substantial growth, a comprehensive review of business processes becomes essential. This review should aim to establish consistency and scalability across various business segments while accommodating variances that may arise due to differences in commodities traded or the regions in which the company operates.
Navigating the transitions between these stages demands addressing distinct sets of responsibilities, risk variables, and pivotal decisions. Effective management, especially during a period of sustained expansion, is not only crucial but also entails the additional challenge of resource optimization. This is especially pertinent in the current landscape marked by constraints on both capital and human resources.
In the realm of commodity trading risk management, the process of designing business procedures extends beyond merely assessing the current state; it necessitates a keen understanding of the future vision. Your business processes must exhibit the resilience required to seamlessly execute that envisioned future.
Consider, for instance, the case of incorporating a robust risk governance framework into your trading operations as a future imperative. It becomes paramount to integrate these considerations into your current process design efforts. In our approach, we accomplish this by aligning with industry best practices and engaging in in-depth dialogues with pertinent stakeholders. Through this collaborative effort, we pinpoint process gaps and strategically prioritize those aligning with the company’s future vision thereby ensuring long term efficiency, scalability and flexibility in trading operations.
Below is a high level view of our approach to business process design:
By prioritizing well-crafted processes, commodity trading companies are empowered to secure their competitive edge, enhance scalability, and navigate the ever-evolving landscape. Whether as an organization you are at the inception stage or experiencing rapid growth, it’s essential to recognize that your business processes form the very foundation upon which trading operational excellence is built.
Strategic business process design serves as the key for achieving success, driving efficiency, managing trading risks, and ensuring compliance. It serves as a compass guiding organizations through diverse phases of their lifecycle, adapting to resource constraints or growth challenges.
Strategic business process design serves as the key to success, driving efficiency, managing risks, and ensuring compliance. It is a compass guiding organizations through different phases of their lifecycle, adapting to resource limitations or growth challenges.
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Conventional manual methods and third-party systems might not provide the needed real-time accuracy for inventory costs and valuation. Additionally, calculating costs for individual units of inventory, especially within a range of contracts, can be time-consuming. The introduction of RightAngle’s latest version, S21.1, featuring the Daily WACOG by Contract capability, addresses the need for accurate, real-time inventory valuation.
Unlike traditional methods that struggle to reflect daily commodity price fluctuations, the new feature in the latest version of RightAngle closely aligns inventory valuation with market dynamics, benefiting businesses with high daily sales volumes. Implementing inventory valuation methodology of WACOG in an integrated system like RightAngle streamlines inventory management and enhances risk and accounting practices. We recommend that our clients embrace RightAngle’s WACOG method, as it offers a comprehensive remedy for efficient inventory management. This solution capitalizes on industry-specific attributes, tailoring options, and alignment with regulations, all of which combine to enhance effectiveness, accuracy, financial gains, and competitiveness.
Challenges in managing inventory costs accurately are widespread. Manual methods can lead to inefficiencies, errors, and compliance risks that affect decision-making. The absence of real-time inventory data visibility can hamper competitiveness, and the complexities of calculating costs for liquid products are a recognized concern.
Current complexities involve disjointed systems, manual calculations, lack of integration with workflows, and the inability to capture frequent price fluctuations inherent in liquid commodities, which ultimately leads to inaccurate cost estimates. Additionally, the continuous flow nature of liquid commodities makes precise inventory tracking difficult, as factors like shrinkage, blending, and measurement inaccuracies can lead to discrepancies in quantity and cost assessments. Managing inventory across various storage facilities, determining appropriate pricing points for cost allocation, and adhering to regulatory standards further contribute to the complexity of the process.
Commodity companies will employ specialized ETRM software and other peripheral systems to address some of these challenges however even then other issues like maintaining data integrity, resource-intensive inventory data updates, error-prone reconciliation processes, and the manual marking of transactions are prevalent in accurately tracking inventory costs and value.
Selecting RightAngle for implementing WACOG inventory valuation for liquids commodities offers several advantages over other ETRM solution alternatives. The integration of WACOG modeling into RightAngle is customized to suit the business’s needs, utilizing the platform’s robust reporting capabilities. This encompasses features like contract-based cost tracking, flexible pool-based cost calculations, and daily WACOG reports for precise cost insights.
To maximize the utility of RightAngle’s inventory valuation capabilities, we recommend crafting bespoke reports within the platform that consolidate diverse inventory data points. By doing so, businesses can streamline their inventory management processes effectively. A notable case involves our creation of tailored reports for a client within RightAngle, where we amalgamated data from various sources. For instance, this approach integrated information from multiple reports, yielding insights into tank-level inventory through the Physical Inventory Interface. This encompassed valuable details, including estimates of daily end-of-day inventory. Furthermore, our solution seamlessly incorporates the Terminal Data Staging Interface, which validates terminal data to facilitate reconciliation. Moreover, the Search Terminal Inventory Recon Interface was utilized to meticulously compare terminal net quantity against transaction records, ensuring the continual updating of reconciliation statuses to promote a well-balanced inventory control system.
Additionally, RightAngle solution provides risk assessment via daily WACOG risk mark-to-market reports. Notably, the “Use Zero Values to Market for WACOG” function refines inventory valuation accuracy. Additional advantages include prior period adjustments, efficient accounting, seamless system integration, tailored reporting, and real-time data access for adaptive decision-making. This tailored implementation ensures accurate cost management, risk assessment, and reporting while catering to the client’s distinct operational requirements.
We advise clients to focus on unique business contexts and leverage RightAngle’s specialized capabilities in WACOG by contract, WACOG by pool, and Daily WACOG calculations. This tailored approach, aligned with industry best practices, sets our recommended implementation of RightAngle features apart from other available options and ensures that it precisely meets the client’s current situation and needs.
The utilization of RightAngle for WACOG implementation for an organization brings a multitude of advantages, specifically tailored to meet the unique needs of the liquid energy industry:
WACOG by Contract provides detailed cost insights for better financial control. WACOG by Pool offers market-responsive cost calculations.
RightAngle recalculates daily WACOG, aligning cost structures with market fluctuations. Crucial for industries like retail fuel, ensuring accurate decisions and risk management.
RightAngle's customization aligns tools with business goals, enhancing performance without compromise.
Seamlessly integrating RightAngle optimizes data flow, boosting efficiency across functions.
Leverage specialized WACOG reporting for real-time informed decisions and market competitiveness.
RightAngle tailors to client needs, offering a dedicated team for success. Partner with experts for a comprehensive solution that drives success.
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The zenith of a company’s CBOL’s journey converges with a pivotal juncture during the software selection phase. This crucial phase aligns seamlessly with our Advisory Services, where our expertise in commodity trading, risk management, and technology come to bear in performing the upfront planning & due diligence to establish a solid foundation. This fusion empowers us to guide enterprises in selecting software solutions that perfectly match their strategic goals.
In this context, a renowned Power Trading Company wanted to improve the system performance while ensuring accurate accounting and reporting. The Customer’s goal was to evaluate various software options and select a consolidated solution with robust CTRM capabilities that was better aligned with their evolved trading needs & technology capabilities. Following Value Creed’s analysis & recommendations, the power trading company chose a suitable software over incorporating new applications. This decision aimed to prioritize reliability and peak performance while achieving their operational aspirations. The case study encapsulates how prudent software selection can significantly impact a company’s journey toward excellence.
Alignment with Strategic Objectives
Comprehensive Fit/Gap Analysis
Expected Costs & Benefits
Our comprehensive Software Selection process ensures a complete study of the business operations. Workshops help us to understand the key requirements of business operations to design a process map and conduct a gap analysis. Since our team is formed of industry-experienced personnel, we’re able to understand the future requirements and needs of the business which plays a key role in software selection service
CBOL™ is a proprietary framework designed to assist trading companies realize their strategic objectives throughout the evolution of their trading operations. This encompassing framework addresses specific needs at each stage, including future state design, software evaluation, implementation, and process optimization.
Our comprehensive software solution engaged stakeholders through surveys and workshops to unearth trading strategies and operational challenges. This process led to an all-encompassing evaluation of available software, assessing alignment with current and future business needs across factors like usability, cost, implementation, extensibility, and integration. Strategic alignment took precedence to future-proof investments and ensure adaptability.
To mitigate implementation risks, a Project Charter, Governance Model, and safeguards were instituted. A holistic Total Cost of Ownership model evaluated software options, managing costs during implementation to achieve anticipated benefits. This approach effectively bridged CBOL’s vision with execution, underscoring technology’s pivotal role in operational excellence.
Business Challenge A multi-state U.S. electric cooperative and its subsidiary required more powerful recording and calculation of the financial and physical risk associated with power
Security Challenge A coal producer operating in the United States and Australia needed a conduit for integrating on-premises CTRM, ERP, and risk interface infrastructure with
Error-free Reporting and On-demand Platform Support Expertise The energy and commodities arm of a large Diversified Trading firm sought robust support for its end-of-day processes
Customize & improve business processes with Value Creed’s Services
A leading global trading company was challenged with streamlining the underlying infrastructure within tight timeframes and was in search of a vigilant project management team and a structured approach for precise migration while maintaining the data integrity and ensuring security compliance. It’s in this context that the company recently partnered with Value Creed’s Advisory Services.
This partnership focused on migrating the ETRM infrastructure & data from an on-premise Oracle database to a cloud hosted SQL database instance, ensuring data integrity and optimizing the database & the Azure setup to deliver the desired performance enhancements to improve the user experience and the backend computational times. It underscores the vital role of Value Creed’s expert program management in driving cost-effective and efficient transformations.
Accountable &
Quantifiable Results
Tangible, measurable outcomes that exceeded expectations
Strong Program
Governance
Structured framework to ensure success & adherence to enterprise standards
Streamlined
Execution
Efficient project delivery that met tight deadlines and optimized resources
Embark on your project with Value Creed’s comprehensive Program Management service. We bring in the right people and assets together to coordinate tight schedules and dependencies. Our industry-experienced team not only enforces but constructs and operates office governance, manages budgets, and meets project deadlines
Value Creed’s program management service, empowered the company to achieve quantifiable results within a challenging schedule. Identification and involvement of all critical stakeholders from a diverse vendor ecosystem with defined roles, ensured a benchmarked practice. This enhanced confidence in our service, adding substantial value to the entire project. Moreover, we ensured complete security and prevention of any data loss during the project since the company had off-shore IT Support.
Performance Challenge A well-known chain of gasoline service stations located across the Southern United States wanted to change CTRM platforms to address new business demands
Business Challenge A multi-state U.S. electric cooperative and its subsidiary required more powerful recording and calculation of the financial and physical risk associated with power
Security Challenge A coal producer operating in the United States and Australia needed a conduit for integrating on-premises CTRM, ERP, and risk interface infrastructure with
Customize & improve business processes with Value Creed’s Services
A diversified trading firm with a wide range of trading activities, recognized the growing opportunities in the precious metals market and decided to establish a precious metals trading desk. This expansion posed significant operational challenges. They faced challenges due to substantial daily trade volume, intricate storage fee management, and the need for efficient exit position creation. To address the challenges faced by this client, we provided assistance in the design and optimization of their precious metals trading operations. We achieved this by introducing modifications to their front office processes and implementing user friendly solutions aimed at effectively managing their trading volumes
Real-time Insights into trading decisions
Reduced Operational Risks
Enhanced Efficiency in trading processes
Accurate Cost Management
Some of the updates that we introduced to enhance our client’s effective management of their new metals business:
Partnering with Value Creed to perform your business process design and optimization tasks gives you a structured approach to current state performance and future state competitive advantage. Tailoring operational flow to your niche will continue to deliver efficiency and profitability dividends over the long term.
In collaboration with Value Creed, the trading firm successfully overcame the challenges associated with establishing a precious metals trading desk. The implementation of streamlined processes, accurate cost modeling, and automation not only improved efficiency but also enhanced risk management and profitability. This case study highlights the value of strategic business process design and optimization in navigating complex financial markets and achieving sustained success. The trading firm’s partnership with Value Creed demonstrates the importance of leveraging expertise to thrive in competitive trading environments.
Learn how a Natural Gas Marketer Streamlined Workflows and Logistics with Value Creed’s Guidance 100% Inventory visibility in real-time 85% Reduction In time spent reconciling
Error-free Reporting and On-demand Platform Support Expertise The energy and commodities arm of a large Diversified Trading firm sought robust support for its end-of-day processes
A diversified energy company based in New York needed to upgrade its CTRM, but had no experience with major technical software upgrades in the past
Customize & improve business processes with Value Creed’s Implementation Services