There are greater pressures than ever for companies active in the commodity supply chain to perform cost optimization. However, too many corporate executives mingle the ideas of cost optimization with cost cutting. Cost cutting is solely focused on cutting expenditures (e.g. reducing employee, equipment purchase and is usually short term viewed), to enhance the overall operating margin, with the possibility of revenue and product quality reduction. In contrast, cost optimization looks on the longer term, how processes should be altered, information redistributed and funds reallocated, such that predefined overall efficiency measures (e.g. margin, market / credit risk, process safety) are optimized. With our experience in analyzing processes, commodity & financial markets and (procurement) portfolios, CForsa can pinpoint the bottlenecks and help clients with:
One of the tools that we at CForsa use to risk manage prices for your procurement process over time and also to contribute to cost optimization is Hedging. The main idea behind hedging is minimizing the risk of financial losses due to adverse prices changes, improving the stability of returns and facilitating a better cash flow management. This allows also for a corporation to enhance the confidence in long-term planning and budgeting.