For manufacturers in every industry, the cost of direct materials is a constant challenge to bottom line results. Accounting for 20-80% of the cost of finished goods, the materials that make up the final product that is sold to the market are often commodity items, beyond the immediate control of the manufacturer. Yet the organization has a responsibility to its customers, its shareholders, and its partners, to make every effort to minimize the impact of commodity price volatility on its supply chain operations. Hedging is one strategy that some companies have undertaken to reduce the risk of commodity volatility, but the strategy of advanced sourcing through the use of enabling technology has proven in many cases to have a more significant and beneficial impact on the supply chain as a whole.
This white paper looks at the challenges in this area and highlights two case studies where advanced sourcing has provided strong results and risk mitigation.