Case Study: Achieve declining procurement costs in the commodities market

Learn how the procurement team at one of the largest diversified food companies in the United States has achieved declining procurement costs in the volatile commodities market.

The Challenge
As a percentage of direct costs, spend on agricultural commodities and other inputs is significant. Our client’s procurement function, working with the commodity risk management team, was tasked with ensuring that commodity requirements are available at the right time and at the best weighted average cost. Their objective is to ensure that procurement costs decline relative to prior years in the face of pressures from volatility in commodity markets.

The Solution
To achieve their objectives, our client required the following:

1. Fundamental Research: Procurement and commodity risk management teams need access to reliable sources of fundamental research to identify signals that could impact price. These signals, in combination with technical indicators, will help them define procurement timing and hedging strategies.

2. Market Data: To support decision making, procurement and risk management need access to up-to-date market prices. To develop risk management models that drive hedging decisions, they also need historical market data.

3. Forecast Benchmarking: To make their proprietary price and fundamentals forecasts credible to investors and other stakeholders, the analysts and procurement teams require a respected external benchmark

To obtain the required market data, analysis, reporting, insights from our analysts and fundamental data across the commodities within the scope, our client adopted IEG Vantage. Their procurement teams subscribed to the Acreage and Production, Dairy, Eggs, Energy, Feed Grains, Soybean, Wheat and Sugar and Cocoa channels.

IEG Vantage is used to zero in on very specific slices of information from international markets where commodities of interest are grown in significant volumes. Of particular interest are such indicators as yield, imports and exports, supply and demand, inventory, and production. These data sets are used as leading or lagging indicators that help the procurement teams predict where prices and other metrics are likely to go.

The Results
IEG Vantage provides our client’s procurement teams with access to current, historical and forecast datasets. Our data set compliments other datasets, particularly technical indicators in models that lead directly or indirectly to procurement cost savings. Working with the IEG Vantage platform and our industry-recognized analysts, the procurement function is meeting objectives and they continue to use IEG Vantage as a part of their toolset for an efficient commodity procurement regime and effective risk management.

Procurement specialist
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