A unique property of commodity trade is the shipment of undetermined quantities. When shipping bulk, or even sometimes in break bulk or containers, it is unknown what the exact quantity at arrival will be. The reason is that it is physical impossible to load an exact amount of a bulk commodity. During a shipment of agricultural or soft commodities the quantity can decrease or increase as a result of the product quality and / or shipment conditions. Many times moisture is a critical factor.
In regular ERP systems it is usually difficult to manage such fluid contracts as mostly exact amounts are required for ERP. CTRM software in general allows shipment of commodities with tolerances, which are usually governed by trading rules for a such commodity contract. For example the GAFTA rules for grains or FCC rules for cocoa. These trading rules allow a tolerance for loading within limits of the agreed contracted quantity and define the rules for settlement of these contracts. To make it even more complex the use of franchises is sometimes combined with tolerances. These practices are common in the agricultural and soft commodity industry and any CTRM system should be able to cope with these complexities.
A typical example is the following chain of events. One might ship 95.5 MT is instead of the contracted 100 MT within the 2.5% tolerance rule, and deliver actually only 94 MT as a result of the commodity losing moisture during the shipment. This weight reduction can be acceptable under the contract when the moisture reduction is covered under the franchise rule.
How does Agiblocks CTRM helps with this?
Agiblocks CTRM provides all the functionality required to manage tolerances and franchise on a contract, its logistics and/or inventory phase and in the price risk management of these contracts. A convenient feature is the use of pre-set weight terms by rules. When such rules are selected, Agiblocks applies al defined standards to the operation and execution of the contracts. Yet another example of the commodity specialization of Agiblocks. These specializations make it easier to manage commodity trade and related price risk.
