Wait: Agiblocks ERP? Isn’t Agiboo’s flagship software solution a CTRM system? Well yes, it is – but a lot of people confuse CTRM software with ERP technology. We’re here to talk about the most important differences between the two, and how you can integrate Agiblocks CTRM into your ERP system to have the best of both worlds.
ERP: Enterprise Resource Management
ERP technology is basically the bedrock of CTRM systems. ERP refers to the consolidated process of gathering and organizing business data through an integrated software suite. It contains applications which automates business functions such as production, accounting, sales quoting and so on. So, again, it’s a very easy mistake to make to confuse the two.
The origins of ERP don’t go quite as far back as the pioneering work of Charles Babbage and his first automatic digital computer (somewhere in the mid 1800s), but it has been around for about 60 years now. The very first version was called MRP or Material Requirements Planning, which was used to plan manufacturing resources such as material, people and machines. This later evolved in MRP II (Manufacturing Resources Planning) which had a much broader approach. Subjects like financial planning, inventory management and purchase planning became available.
In the 1990s MRP made its hitherto final adaptation, to ERP: Enterprise Resource Management. It addressed all enterprise functions including financial accounting and HRM.
Examples of modern ERP applications include CRM (Customer Relationship Management, not to be confused with CTRM), product lifecycle management, supply chain management and decision support systems. An ERP is a very useful tool, BUT it’s not a CTRM.
ERP Vs. CTRM
A CTRM is the software-pillar for all departments in a commodity company, like logistics, trading, finance, IT and the management. With this core software, employees can perform their daily tasks and transactions accurately and efficiently. Any modern CTRM solution is available through cloud solutions and on mobile devices, so it’s available anytime, anywhere, with all required information immediately available.
It is common knowledge that ERP systems do not really cater for commodities companies’ specific needs. It is the character of the trading business that differs from standard wholesale and/or manufacturing business that creates those challenges. Differences we cannot just overcome by adding functionality to an ERP, as it requires a fundamental different approach. Or as our own Jan van den Brom would far more aptly explain it:
“You simply can’t use the same pan to cook eggs, pasta or stew meat. Even if you manage to fit the stew inside a pan designed specifically for eggs, you will not be able to cook it properly. So too it works with the commodities businesses: you simply can’t have your ERP system perform all your commodity functions, transactions and risk monitoring. Even if you attach 10 more ‘add-ons’ offered by your ERP supplier, your “stew” will be still be spilling out of the pan and all over your stovetop.”
CTRM is the way to go for commodity trade
It should come as no surprise then that we at Agiboo advocate strongly in favor of a CTRM solution. Commodity Trade and Risk Management software is created specifically to assist the daily specific functions in the complex world of commodity procurement and trade. It is, in other words, a software dedicated for any and all commodity trading transactions and business processes. Its architecture, applications and functions should assist the daily work of all involved. Meanwhile, it offers solutions to the traders and management to control and minimize the risks of the commodity trading activities and the business as a whole.
Why is it so important to use an industry-specific CTRM solution? Well, the key component is that the system matches all the intricacies of the industry. The cocoa trade for instance, much like the world of sugar, coffee and cotton, is very peculiar and very specific. Your software should reflect that and have all those variables and requisites built-in to allow you the freedom and flexibility necessary to do your job as a commodity trader. Any generic solution will weigh you down with unnecessary features, as well as fall short on specifics – the part that really matters when you’re looking for efficiency gains.
Advantages of an industry-specific CTRM solution over an ERP
It’s not difficult to fathom how Agiblocks is the obvious choice over any generic software solution, but those arguments hold true when compared to an ERP as well.
For instance, ERP software supports standardized wholesale, manufacturing and services environments from a transactional perspective and integrates with accounting applications. Its architecture eliminates variance in processes to ensure adequate production processes, related transaction management and accounting processes. In the end most ERP’s reduce complexity and record transactions and value based on concepts like Bill of Materials or Work Break Down structures. ERP is usually centered about creating certainty and defining cost. A CTRM on the other hand does not reduce complexity. It enables companies to use that complexity to their benefit, as variance is intrinsic to commodity businesses.
At the start the quality aspects of soft and agricultural commodities may vary during the lifetime of these commodities and form the basis for the spread in monetary values and risks in trading. Down the road, one trades commodities in different markets and different currencies under different terms and thus the monetary trading values differ in different environments as well. CTRM enables a company to manage these complexities and benefit from then, not just to eliminate them for process or accounting purposes.
Moreover, most ERP software systems have a linear architecture, reflecting the structure of the business they support. They follow a certain line of functions and execute transaction according to their structure. Transactions and value development through the structure would follow a rather predefined and mostly sequential flow. CTRM systems have a unique and far from linear architecture, as it needs to cope with the versatility and variance and needs to support creating value from it. Even though we could observe an initial linearity, transactions and value development through the structure would follow an iterative and unpredicted or even paradox path. The architecture is the very essence of a CTRM; the core of your system has to be compatible to the characteristics of your business.
Hedging and Risk Management
Another key feature of a CTRM is its facilitation of hedging of trades. Interdependence between activities or variable value drivers are usually difficult to manage in ERP systems – for example, when dynamic price curves, trading or hedging strategies. There are limitations in viewing and using combined data information contracts, commodity hedges or currency swaps, thus limiting integral position management, valuation and forecasting.
A CTRM tool designed for commodity procurement or trading is based on long/short position management, which enables companies to manage hedge portfolios either intrinsically or through the use of derivatives and/or swaps. A solid CTRM gives you freedom and agility in portfolio valuation and forecasting.
Moreover, the aforementioned limitations in the structure and capabilities of ERP systems prevent ERP in the most important need of the commodity trading business: managing value and risk. Commodity business have critical differences from wholesale or manufacturing or services businesses. They are just not so simple and straightforward! Even within the commodity industries there are differences. The rules of the game, the terminology, contracts, calendars, trading methodologies simply vary from commodity to commodity, and even from company to company. If an ERP cannot adequately capture transactions, cope with versatility and variance, but merely supports linear processes, how can it adequately support commodity risk? The functionality of CTRM software overcomes those difficulties in managing your commodity business.
Managing long/short positions, hedge portfolio’s, variable pricing, forward price curves and a value orientation are where CTRM systems live and breathe. For a commodity trading business or even a procurement business a CTRM with the right business fit is a prerequisite for short-term performance and long-term existence.
ERP System Integration
CTRM functions always have somewhat been outplaced of ERP because of multiple reasons. As a product, it really gains value when an organization has to manage market risk on commodities. Many organizations do not have that challenge, but in soft and agricultural commodities it’s all too common. Market risk for cocoa beans and sugar has to be managed and this requires immediately a system which can manage derivatives and positions.
ERP System Integration is the method by which a business connects its ERP software with other applications. The objective is to share data across systems to improve productivity and insights and create a single source of truth. There are several conventional approaches to achieving this, including point-to-point, ESB (Enterprise Service Bus), and iPaaS (Integration Platform as a Service). Integrating different pieces of software with an ERP is complicated because each piece of software has its own clearly defined set of rules about how it wants to manage and use data. The job of the ERP system integration is to sync data in the correct format while ensuring it remains accurate and useful. Doing this at scale requires a system that is organized and logical and that your team can maintain over time.
The aim of an ERP system is to create a single source of truth for an organization. The benefits of achieving this are huge, including real-time reporting, increased productivity, reduced operational costs, and improved business insights. However, an ERP system cannot do this effectively without data – and integrations are how that data gets into the system.
Agiboo’s Top 5 of ERP’s integrated with Agiblocks
At Agiboo we integrate Agiblocks CTRM with a number of ERP systems. We’d like to share our top 5 of ERP systems we integrate with.
Our number one is definitely SAP. Founded in 1972 many of our customers run SAP. From SAP ERP 6.0 to SAP S/4 HANA, Agiblocks CTRM Integrations are available on all business levels. It has been the standard in ERP for a long time and most of Agiblocks customers with and ERP have SAP, which further cements its position at the top of our list.
The world leader for operating systems and small business software. Microsoft offers ERP through their Dynamics. Agiboo has integrated both AX or nowadays Microsoft Dynamics 365 and Microsoft Dynamics Navision. This also on multiple integration levels. When organizations do require financial accounting with CTRM as one package, we bring out a pre-integrated solution with Microsoft Dynamics. Even to QuickBooks the integration is available. Moreover, we provide connectors for Agiblocks and MS Business Central.
Founded in 2002, Infor delivers a variety of ERP systems such as Infor BPCS/ERP LX, Lawson, M3 and ERP LN (Baan). Agiblocks CTRM integrations are available for most of the suite, and it’s exactly because of that large offering of types of ERP that Infor is number 3 on the list.
With its flagship products JDEdwards and PeopleSoft, Oracle serves the ERP market with strong products. It is less common than all aforementioned solutions, but nevertheless deserving of a recommendation in Agiboo’s Top 5.
Sage is the world’s third-largest supplier of Enterprise Resource Planning software and used by many commodity traders. Agiblocks CTRM has technical interfaces in place to support direct integration. A fine addition to round up our five favorites.
Agiblocks CTRM: find out more!
Agiblocks is not just the next generation of CTRM systems, but a solution that truly meets all technical as well as business needs for anyone working in soft or agricultural commodities. That’s why anyone looking for CTRM software for the commodity trade – whether you are a trader, buyer or seller dealing with single or multiple soft and/or agricultural commodities – should look no further. Download our latest whitepaper here.
Rather have a live Agiblocks CTRM software demo to experience what our flagship software can do for you? Request a live demo if you are:
- a trader in soft and/or agricultural commodities;
- a buyer or importer of soft and/or agricultural commodities (for instance a producer purchasing raw materials);
- a seller of soft and/or agricultural commodities
…or if you are simply interested in our next-generation CTRM solution!