Managing commodity risk is a key concern for most global manufacturers. The ongoing economic turmoil in the world's financial markets has made this task all the more challenging.
This paper explores the turbulent conditions in the global commodities market, and the implications for global manufacturers as they consider their 2009 procurement needs and look for ways to alleviate cost pressures.
Our experience indicates that global manufacturers should, at a minimum, assess the following strategies to enhance their procurement, production, and business processes:
- Spread costs by extending value
- Integrate procurement
- Strengthen operational efficiency and pursue lean manufacturing efforts
- Review hedging strategies
- Incorporate commodity risk within the overall risk management framework.