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MetalMiner - Why Commodity-Buying Organizations Need Their Own Hedging Strategies
Why Commodity-Buying Organizations Need Their Own Hedging Strategies
Though we don’t take on too many consulting projects these days, we received a call from a client late last week that got us thinking about what we call the “commodity volatility conundrum. That conundrum goes something like this: “We (the buying organization) would like to have our supplier(s) hold pricing firm for a longer period of time, despite the fact that commodity volatility has caused mills and distributors to offset that risk with shorter quote validity terms.”
The commodity conundrum becomes further complicated when buying organizations refuse to commit specific volumes. But why would a smart sourcing organization just turn to its supplier(s) to hold prices fixed for longer time periods? Read the article to find out.
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