Commodity Analysis in Supply Chain Management

The commodity chain analysis outlines a number of steps involved in the product development process ranging from product design conception, raw material sourcing, and the final consumption. The commodity chain analysis comprises various steps ranging from production, manufacturing, packaging, transportation, and distribution. Today, we’ll discuss commodity analysis in supply chain management; key elements, differences; and commodity chain analysis in supply chain management.

Stages Involved in Commodity Chain Analysis

• Upstream: extraction and processing of raw material
• Midstream: refining and assembling of material, parts, and goods
• Downstream: marketing, sales, and distribution of products and goods

Supply chain management outlines the network of people, processes, information, activities, and resources involved in the production, development, and distribution of products to the end consumers. The goal and objective of SCM is to deliver the products from the suppliers to the end consumers efficiently. However, the SCM process comprised of the following stages;

• Acquisition of raw materials, parts, elements, and goods
• Transforming the material into finished goods in the production and manufacturing units
• Delivering finished goods to the distribution centers
• Shipping goods to the retailers

Stakeholders Involved in the Supply Chain Management Process

• Suppliers
• Manufacturers
• Distributors
• Retailers
• End consumers

Elements of Commodity Chain Analysis

Let’s discuss the main elements of commodity analysis in supply chain management are as follows;

Continuous Supply

The commodity chain focuses on proactively looking for the raw materials, parts, and components necessary for production and manufacturing. A robust sourcing strategy would help the company ensure the smooth availability of raw materials and decrease the risk of market fluctuation, geographical events, and natural disasters. However, the smooth availability of raw supplies and materials would help the company satisfy customers’ demands and deliver products on time.

Optimizing Cost

Effective commodity chain processes help companies to achieve cost optimization and cost efficiency. It comprises building long-term contracts and partnerships with suppliers and partners, helping companies receive the best-negotiated prices and discounts. However, risk analysis and market intelligence would allow companies to make efficient decisions and decrease the risk of price volatility.

Decreasing Risks

Geographical issues disrupted supplies, and volatile commodity prices would significantly impact the supply chain network. The commodity chain has the capability to deal with various types of challenges efficiently with a diverse supplier network and implementing dual sourcing strategies. Dual sourcing strategies, contingency plans, and risk analysis would help companies to decrease the risk factors and ensure business continuity.

Adaptability and Flexibility

Adaptability and agility play a key role in the survival of a business in a highly competitive environment. The commodity chain allows SCM to respond quickly and efficiently to changing market conditions. However, if you carefully analyze the market demand patterns, then it allows them to adjust their inventory and procurement strategies.

Sustainable Strategies

Commodity chain management plays a key role in promoting environmental sustainability in the supply chain network and processes. Responsible sourcing would help companies to decrease the carbon emission rate and promote ethical and social sustainability.

Differences between Commodity Chain Analysis and Supply Chain Management

Some of the main differences between commodity chain analysis and SCM in commodity analysis in supply chain management are as follows;

Procurement Differences

Procurement is the main differentiating area between commodity and supply chain analysis. The commodity focuses on all the processes comprising production, manufacturing, distribution, and consumption. On the other hand, procurement is a specific area in the supply chain and different companies have different procurement policies.

Broader Term

The supply chain is a very broad term and it comprises all the stages outlining the overall flow of products and goods from suppliers to manufacturers, distributors, and the end consumers. On the other hand, a commodity chain is the collaboration and coordination among various stakeholders like logistics service providers, customers, wholesalers, and retailers.

Focus and Scope

The focus of the commodity chain is on the specific types of products; whereas the focus of the supply chain is on multiple types of products and goods. The SCM puts a great emphasis on the efficiency of all the processes through Lean Strategy, JIT, and other approaches. However, the commodity chain focuses on social issues in every stage of production and manufacturing.

Transparency

The commodity chain has limited transparency and visibility in its network than the modern and integrated SCM. There are multiple stakeholders involved in every stage of the commodity network and they don’t have full visibility in their operations.

Conclusion: Commodity Analysis in Supply Chain Management | Commodity Chain Analysis in Supply Chain Management

After an in-depth study of commodity analysis in supply chain management; we have realized that commodity chain and SCM may seem similar but they have a lot of differences. If you are learning about commodity chain analysis in Supply chain management; then you should keep in mind the abovementioned elements, differences, and the processes of SCM.