Automotive

The automotive industry is exposed to multiple commodity price risks. This varies from aluminium and steel for the bodywork to products like rubber (styrene), plastics and paint. A strong automotive risk management policy secures your competitive advantage.

Chief Procurement Officers need to have a daily overview of all contracted commodity components (e.g. aluminium body parts). By using the KYOS portfolio management system the total weight of all individual commodity components can be grouped per category. Users can simulate market prices & commodity volumes. Automated models calculate and report commodity positions, cash-flows and risks. The finance team has an up-to-date overview of the certain and potential cash-flows. Even better: no unexpected surprise afterwards as a result of rising costs versus the previous quarter.

To maintain your competitive advantage.you need to manage these volatile prices of all raw materials involved.

Business improvement

Multiple category buyers will profit from automated commodity market price analytical functions. Each user is able to define a category specific portfolio of commodities. Also, no more use of spreadsheets as all category buyers use the same integrated commodity & risk management system. Furthermore, the Chief Procurement Officer has an up-to-date helicopter overview across all commodities. With the KYOS Portfolio and Risk management system it is easy to secure compliance and consistency for all categories. Moreover, you save valuable time sharing your analysis across the organisation as multiple colleagues can view the results.

Your automotive risk management policy can be seamlessly integrated with the KYOS portfolio & risk management solution and your existing ERP environment. It creates a bridge between standard ERP capabilities and market price analytics. Resulting in strongly improved cash-flow forecasting and clear risk figures.

Cost savings – KYOS portfolio & risk management system

The rising costs of commodities can heavily affect your bottom line. To overcome this, suppliers of synthetic rubber link the rubber price to benzene or styrene as traded on commodity markets. Resulting in a transparent price structure.

Managing commodity risks is inevitable for industrial companies, accurate and up-to-date information is crucial to stay ahead of competitors. Managing this crucial information in Excel has proven to be a pitfall for many companies in terms of costs, mistakes, hidden risks and potential fraud. Likewise ERP systems such as SAP look backwards in stead off to the future and cannot perform the required risk management calculations.

In the KYOS portfolio & risk management system you are able to calculate the total weight of your metals bought from all commodity price formulas in a split second. It will save days compared to Excel based analysis. Resulting in significant lower costs with less time spend.

Managing cashflow variance

The higher and more frequent market prices move up or down the higher its volatility. Volatility is often expressed in a percentage and can be calculated for e.g. interest rates, currencies (FX) and commodities. A highly volatile market price is not per definition a bad situation but you probably feel more comfortable with less volatile costs. For example aluminium has shown an average volatility of approximately 20% in recent 5 years. This is more than double the volatility of EURUSD in the same period. Calculating the volatility should be an integrated part of your metal risk management strategy.

Energy is also a component that is part of the cost structure. The manufacturing process consumes a high volume of natural gas and electricity recognized as direct energy costs. Carglass is an example of indirect energy costs as glass manufacturing requires a high volume of natural gas. Metal producers pass on energy costs to the automotive industry as well. Prices of Styrene and Wire Rod are the main drivers of tires.

In the portfolio & risk management system you can upload commodity budgets, consumption, inventory and contracts. The system also combines your physical positions with the automated market price analytics. It will provide you with clear insight in the current cash-flow and potential cash-flow variance versus budget expectations.You are therefore able to react before rather than after price movements.

As a result of integrated automotive risk management you will have a better insight in contracted and/or open positions, cash-flows and the associated risks. This is a advantage for your company, not only for procurement, but also for sales, finance and treasury. KYOS has extensive experience to bridge the knowledge gap between multiple departments.

Automotive risk management – Fixed or floating prices

Finding a balance between fixed and floating prices is for sure part of your hedging strategy. Fixed prices means that the cash-flow is secured for the commodities ordered but offers no possibility to profit from favorable price movements. An acceptable balance of fixed and floating prices depends on multiple factors. The KYOS portfolio & risk management system will help you to find your “risk and reward” optimum by simulating multiple cash-flow variances. In addition, it will provide you with clear insight in the potential cash-flows given any variance between fixed and floating prices.

Start managing your cash-flow variances and subsequently lower your required working capital! This is a clear advantage of integrated automotive risk management.

Solutions

• Portfolio & risk management / CTRM
• Price simulations and analytics
• End-of-Day market price forward curves
• Live market price forward curves

Multi-commodity risk management

• Food
• Beverage
• Chemical
• Construction
• Metals
• Paper
• Transport
• Waste
• Automotive

Publications

• Nexidus Commodities official distributor in North America
• NEVI Procurement Day 2019