Commodity Management Solutions from SAP: Product Demo

Learn how commodity management solutions from SAP help manage commodity purchase and sale transactions while helping manage commodity risk. See how to create a purchase order, check raw commodity exposures, check current risk position and execute a hedge, verify executed hedge, and verify updated risk position.

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    • Commodity management solutions from SAP Drive commodity management excellence
    • Commodity management solutions from SAP help you manage commodity transactions from end-to-end, for purchase or for sale, and help you manage commodity risk.
    • They also provide needed information on commodity-based transactions to business groups across multiple disciplines and locations.
    • See how commodity management solutions from SAP allow you to
    • Create a purchase order, Check raw commodity exposures, Check the current risk position and execute a hedge,
    • Verify the executed hedge, and Verify the updated risk position.
    • Helping you to Effectively manage commodity purchases and sales, Review logistical and financial data on a real-time basis,
    • Align business operations, risk management, and hedge accounting, and Move from manual processes to an automated end-to-end process to gain a competitive advantage.
    • Create a purchase order
    • In this example, Diane is a procurement clerk at BestRun, a major food company that uses commodity management solutions from SAP.
    • She needs to order wheat for production, so she opens up a new purchase order.
    • Since the software is integrated and supports predefined processes, the data is prefilled for the order date, vendor code, standard quantity, and expected delivery date.
    • Diane wants to check the terms that were negotiated for this purchase.
    • At the "conditions" tab, a commodity pricing engine uses terms and conditions, quantity measurements and tracking, quality adjustments,
    • and market-based pricing, such as index-based commodity pricing, to generate the price per unit and cost based on that rate to create the commodity contract.
    • She now wants to verify the invoicing terms.
    • She sees that the pricing terms include both a provisional and a final invoice, which are calculated automatically, improving accuracy and efficiency.
    • The quotation period for the commodity price is in the future, but Diane knows that this order will meet the company's production needs based on the delivery schedule even though it will be priced in the future.
    • Diane saves the purchase order. Satisfied that the information is correct, she has generated a completed purchase order.
    • Check raw commodity exposures
    • Thomas is a risk manager at BestRun. He wants to verify that the proper information for hedging is transferred to the risk group.
    • First, he checks to see what raw commodity exposures have been generated based on the purchase order that Diane issued, so he enters the number of the PO from the logistical document.
    • He doesn't see any immediate risks in the overview, but this is a summary screen, so he drills down by clicking on the exposure itself.
    • When he selects the Line Item Data tab and reviews the details, he verifies that this PO is for a floating-price purchase, and confirms that the treasury group will see this risk.
    • Check the current risk position and execute a hedge
    • Carol, the treasurer at BestRun, wants to review the commodity-risk position for wheat.
    • As she creates a report, she can select conditions for the commodity type, order date, and so on, as well as any conditions for derivatives.
    • She can also select control parameters related to currency, valuation, error handling, and output.
    • This report shows the recent purchase order for 150 tonnes of wheat, and that the price is floating or market-based, which presents a risk for the company.
    • Carol wants to make sure the company avoids any market-based price risk related to the purchase of wheat.
    • She decides to execute a future to “lock in” the price. To reduce the market risk, she buys futures to hedge the floating price in the wheat purchase order.
    • BestRun already has an account set up with its bank to handle this and the solution provides standard data to help her execute the transaction.
    • Carol enters the number of units she wants to hedge and the payment date. She chooses the Accounting Associate tab to process the futures transaction.
    • Carol has created the futures transaction as a hedge against the floating price in the wheat purchase order.
    • Verify the executed hedge
    • Frank, a back-office clerk at BestRun, is notified so he can verify the treasury transaction that Carol just executed.
    • BestRun uses the solution to ensure that its treasury transactions are checked by more than one person, based on the segregation of duties principle.
    • Frank selects the “settle” functionality to process the trade. He reviews the details, approves the transaction, and waits for confirmation of the approval. Now Frank sees that the transaction is approved.
    • Verify the updated risk position
    • Later in the day, Thomas the risk manager, checks the updated risk positions. He selects Commodity Position Report. Since this is a normal review, he uses the pre-set parameters, and he updates his report.
    • Here, Thomas sees that a future has been purchased as a hedge against the floating price risk generated from the original wheat purchase order.
    • The price risk is now fixed and in compliance with the company’s risk policy.
    • As you have seen, commodity management solutions from SAP lets you handle the comprehensive process of managing commodities and their inherent risks,
    • and execute business operations to align your company’s expected view of commodity risk.
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