QUOReka Optimizing Commodity Trading: The CTRM Advantage Over ERP

Enterprise Resource Planning systems (ERP systems) are used almost ubiquitously by many types of businesses to manage, track and report on many aspects of their operations and to try to optimize business processes using an integrated and consistent application. Usually, the ERP will cover all aspects of the business from order management, through procurement, contracts, distribution and storage, workforce and inventory to financials. Such solutions are now considered a vital prerequisite and critical solution to support operations. Firms exposed to the complexities of physical and financial commodities will also often have an ERP solution installed unless they are pure merchants or traders. Sometimes, these firms are tempted to try to utilize the ERP to perform their trading and risk management activities as well.

Over the last twenty or so years, commodity traders, merchants, financial firms and others have utilized Commodity Trading and Risk Managements solutions (CTRM solutions) to help them manage, track and report on the various aspects of their commodities business and trading and risk management activities. These specialist solutions were specifically designed for the complexities of commodities. In businesses with exposure to commodities, the CTRM is often tightly integrated with the ERP solution to provide the best of both worlds. Some, however, seek to soldier on with modified ERP solutions, spreadsheets and other homegrown tools that lack audit trailing and likely increase risk. This whitepaper will explore the differences between these application areas and why it is imperative to utilize a CTRM solution when trading, moving and managing physical commodities.