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Case Studies - Consulting

Crude Oil & Polymers

Project Use of Price analysis & Forecasting for hedging commodity sourcing risk
Challenges    -    Volatility in crude oil leading to fluctuating prices of crude derivatives like waxes and packaging material
Task for TransGraph    -   To delineate the client from volatility and trending & cyclical nature of commodity prices
   -   To assist in Price forecast based procurement budgeting
   -    To plan & time purchases based on the price forecast.
Commodities Micro crystalline wax, paraffin wax along with packaging materials like HDPE, PP, PET, LLDPE, LDPE.
Accomplishment of the task    -   The project objective was met by supporting the client through:
   -   Long term price forecast for each commodity at the start of the financial year
   -   Regular support to plan and time purchases in line with the consumption requirements
   -   Utilizing the forecast as a proxy for marketing plan in designing discounts and offers.
   -    Long term supply agreements were instigated with suppliers for packaging materials.
Net Outcome    -   Successfully managed the portfolio of raw materials assigned and assisted the client’s procurement team in shipping their raw material shipments well below the budgeted price levels
   -   Savings accrued from the assignment were up to 11.5 percent from the market average price among the portfolio of commodities.

Dairy Product

Client A Leading confectionery company
Project Developing Knowledge based procurement system for key raw materials
About the Company    -    The Client is a leading confectionery company with market share of over 60% in the chocolate segment.
Challenges for the Client    -   Assured supply of the raw materials throughout the year overcoming seasonal availability of the agricultural commodities
   -   Frequent revision of prices by the vendors leading to budgetary overshoots
Task for TransGraph    -   Formulating a mechanism which provides critical insights into the commodity dynamics.
   -   Assist Client procurement team with robust price negotiating framework
   -    Identify potential suppliers/ vendors
Commodities    -    Milk and milk powders, Malt extract, Cocoa, cocoa butter, Dry fruits (raisins, cashew, almonds, apricot) liquid glucose, sugar and edible oils viz., vanaspathi, palm olein, HPKO and packaging materials like PP,PE, Paper and Paper boards.
Accomplishment of the task    -   Value chain analysis of the ingredients through extensive field work
   -    Estimating the availability by understanding the fundamentals of commodities.
Net Outcome    -   Identification of value of the by-products obtained during malt extracting, which could be used in price negotiations.
   -   Negotiation tools for minimizing the raw material purchase prices by properly understanding the stages of value addition
   -   Potential savings (difference in market average price and TransGraph suggested purchase price) of around 5 percent; Significant reduction in budgetary overshoots

Metals

Case Study #1

Client One of India’s largest automobile company
Project Strategic initiatives on procurement and managing price risk of metals
About the Company    -    Client is the market leader in MUV segment and exposed to market volatility in metals like steel, copper, zinc, lead, aluminum
Challenges for the Client    -   The company procures auto components from the vendors and was facing issues like
   -   Trending commodity prices leading to frequent upside revision of contract prices by the vendors
   -   Sales price being not directly linked to LME (raw material prices)
   -    Impact on profitability
Task for TransGraph    -   Key challenge for TransGraph has been to
   -   Reduce the commodity price risk and maintain sanctity of the procurement budget
   -   Bring consistency in the profitability by reducing net buying price
   -    Evaluate alternate procurement strategies from the existing practice and fill in any gaps in the system
Accomplishment of the task    -   TransGraph has brought in remarkable benefits by
   -   Successfully establishing the CRMC (Commodity Risk Management Committee)
   -   Enabling supplier negotiation and incorporating necessary changes to the existing pricing framework.
   -   Implementing Price-outlook based component pricing that has resulted in savings to the tune of more than 1% of the substantial commodity exposure
   -    Active support in price outlook and hedge strategies

Case Study #2

Client Client is one of the largest Winding Wire Manufacturer
Project Assessing and managing the copper price risk with critical focus on profitability.
About the Company    -    The Company is in to Magnet Wires / Winding Wires and Electric cables manufacturing and is directly exposed to copper price volatility.
Challenges for the assignment    -   Major challenges under the project were
   -   Buy price being linked to LME
   -   Sale price being linked to LME
   -   Shrinking margins for the value added product
   -   Typical sales cycle, leading to negative margins.
Task for TransGraph    -   The business objective of the assignment was defined to ensure
   -   Effective procurement system ensuring purchase value is equal to sales value
   -   Hedging in physical and financial markets to lock in the prices
   -   Protecting the margins
Accomplishment of the task    -   TransGraph has delivered successfully a practical Hedge frame work and is working closely with the client on timing the purchases.
   -   The client is able to realize savings of over 4% from market average prices of copper
   -   Assured margins in the business.
   -   The client has been able to expand the market share in the industry with proper systems in place to ensure profitability.
   -    Knowledge Training has ensured improved process driven decision making.

Case Study #3

Client Client is one of the leading auto ancillary manufacturers based out of India.
Project Risk Management on Aluminum and Currency.
About the Company The company is in the business of manufacturing various auto components and is exposed to aluminum and currency price risk.
Challenges for the assignment    -   Client sources raw material from domestic and international markets and chiefly exposed to the price risk of aluminum.
   -   Buy price and Sale price are linked to LME aluminum prices
   -   Company facing uncertainty in profits in different market conditions due to the existing sales formulae.
   -    Currency price risk accrued due to aluminum imports added to the existing issues.
Task for TransGraph TransGraph was entrusted the assignment to ensure    -   Effective implementation of Price forecasting services to optimize procurement spends by timing the physical purchase.
   -   Hedging in LME for locking in the margins
   -    Regular Currency outlook and hedge strategies to freeze the value of aluminum and minimize the effect of price fluctuations
Accomplishment of the task TransGraph has brought in remarkable qualitative and quantitative benefits to the client by
   -   Protecting the profitability by ensuring procurement below market average aluminum prices.
   -   Hedging to bring consistency in margins and reduce net buying price.
   -    Setting up of Risk Management team and systemizing the Risk Management policy by clearly defining the Hedge mechanics, proper usage of Value at Risk Concept to measure the risk, defining roles and responsibilities with in the teams of procurement and finance.

Case Study #4

Client Client is one of the emerging Galvanized steel manufacturer.
Project Procurement optimization of Zinc Metal
About the Company The company is in to galvanize steel (H.R & C.R) manufacturing and in the process is exposed to Zinc Price risk.
Challenges for the assignment    -   Zinc purchase price linked to LME where as sale price of galvanized steel not linked to zinc pricing.
   -   Zinc procurement budget overshoot
   -    Inconsistent profitability due to price volatility in the commodity
Task for TransGraph TransGraph has taken up the assignment to:    -   Optimize the procurement spend by timing the physical purchases
   -   Develop a hedge frame work detailing “Hedge” and “Not to hedge” decisions
   -    Active support by way of suggesting hedge positions on MCX.
Accomplishment of the task TransGraph consulting successfully delivered the Hedge Frame work.    -   This project has resulted in improved efficiency in procurement of zinc with savings of over 2% achieved by procuring below market average prices.
   -   Locking in the margins and inventory value by efficiently hedging the risk in domestic exchanges.
   -    Implementing a process driven approach in risk management

Fruits & Vegetables

Project    -   Designing the sourcing strategy for a set of fruits & vegetables (F&V)
   -    Procurement advisory and Financial Hedging services in selected commodities
Challenges for the Client    -   To systematize purchases with vendor identification, selection and streamlining of vendor base
   -    Artificial price inflation with presence of corporate buyers in the market and geographic spread of procurement activity
Task for TransGraph    -    Suggesting suitable procurement strategy by understanding the value and trade chain for the select F&V
Commodities    -   Mango – Himsagar, Totapuri, raw mango; Guava – white & pink; Pomegranate; Sweet orange; Pine apple; Grapes; Litchi; Ginger; Garlic; Tomato.
   -    Solvent extracted GN oil, Coconut oil, RBD Mustard oil & Sesame oil and Sugar & Gur.
Accomplishment of the task (f&v)    -   Extensive primary survey carried out across the country in the production and trading centers for all the fruits & vegetables
   -    Support vide market intelligence during the harvest & market arrival season with crop estimates, likely price direction and expected price range prior to start of season
Net Outcome    -   Potential savings of 5 to 8 percent from the market average price fo each F&V during the procurement season
   -    Smooth and efficient sourcing of F&V by regular Interaction with procurement team on quantum purchases and price levels at which shipments were booked


Case Studies - TransRisk

Oil and Oil Seeds

Project Risk management of Soy Complex portfolio using TransRisk
Challenges    -   Huge positions in inventory made risk management very important and at the same time difficult to have a holistic view of the portfolio's exposure to market volatilities.
   -   Meeting the profit targets while managing the risk effectively
Task for TransGraph    -   To properly timing of the procurement & liquidation without making the market is a key challenge.
   -   Understanding the business process so as to establish a risk management process. RMP (Risk Management Policy)
   -    To actively support through account management for better procurement and hedging decisions.
Commodities Soy Complex (bean, meal and oil)
Accomplishment of the task    -   TransRisk, risk management software based on VaR (Value at Risk) provides Exposure Summary – as on date summary of the portfolio’s exposure and risk in many angles. Generates several standard and user defined reports needed to take informed business decisions.
   -   Daily trading strategy reports based on both Price Outlook and Risk of the portfolio.
   -   RMP based on Imputed Risk Limits establishing a sound risk management process
   -    Created a Simulation builder which lets the client simulate scenarios of market prices, volatilities and exposures.
Net Outcome Advance indication of Risk involved and decision enabling price forecast led to consistent profits and establishing enhanced Risk Management policy at place.

Conference Papers

Our analyst team has a vast experience in sharing opinions with Financial Express, Business Line, Market technician etc. Also, TransGraph has got great reputation at the conferences all around the world. Its papers are well acclaimed at the commodity conferences like Globoil, Arabal Aluminium, POC, CTRM, Metals Outlook Seminar, POTS, Indian Rubber Summit and Dinner, AISC (Sugar Conference), Indian Sugar Summit, Global Petrochemical Conference (Polymer Update's) to name a few.

Here is the list of the papers presented at various conferences and events:

- Edible Oils Price Outlook for 2013 @ @ COOIT Golden Jubilee Celebrations

- Mapping the Indian Edible Oil Market @ POTS Kuala Lumpur 2012

- Mapping the Market Thought of oil and oilseed complex @ GLOBOIL 2012

- Mapping the Market Thought Approach for Predicting NR Prices @ India Rubber Summit and Dinner 2012

- Price Forecast for Oilmeals & grains in Short & Long term @ Feed and Feed Ingredients Conclave 2012

- Price volatility and Indonesian tax structure – way forward @ POTS INDIA 2012

- 2012 Outlook on Base Metals @ Metals Outlook Seminar 2012

- Volatility Risk Management - What You Cannot Measure, You Cannot Manage @ POC 2012

- Indian Perspectives on Indonesian Export Tax Revision @ Palm Oil Economic Review & Outlook Seminar 2012

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Testimonials

“ I am writing to extend my thanks for the research and price forecasting services provided to us on a daily basis by Transgraph. The reports and information whether they are emailed to us daily or sourced via your website portal, are a consistent and reliable source of quality information. Our industry is one where information and its dissemination can help in differentiating between suppliers."

- Scott Yarwood, Sr. Regional Sales Manager, ADM Trading (UK) Ltd.



“ This is to state our appreciation for Transgraph for continuously delivering on its mandate to provide updated and insightful consulting services in the area of commodities and ingredients. I would also like to thank your team that is always in touch with buyers and feeds in relevant information that has been many times useful in decision making. In nutshell, the engagement with Transgraph has been enriching."

- V. Sridhar, Sector Manager, Commodities & Ingredients, Cadbury India Ltd.



“ By helping simulate the risk scenarios beforehand, TransRisk has added immense value to our trading decision making process at the operating level. The scenarios are comprehensive because one is able to view the basis and rollover risks associated with the hedged positions too. TransRisk also serves as good Dashboard for the top management, as it gives exposures, P&L, associated risk, limits all at one place.”

- S Sivakumar, CEO, Agri Business, ITC Limited



“ At risk framework and imputed risk model of TransRisk are definitely forward looking and will enable us to move away from ‘post mortem’ approach. We can take a business decision of pricing our contracts or purchasing in advance after factoring in a quantifiable and acceptable risk instead of trying to find reasons for the breach of limits."
"A flexible and scalable business intelligence that gives exposures, P&L, associated risk, limits all at one place and this decision support system can be integrated with our existing ERP and will avoid duplication of data entry.”

- Jude Magima, ED – Sourcing and Supply Chain, Dabur India Limited



“ Transgraph has showcased that ‘Risk Management’ is an excellent tool which will help any sourcing organization to deliver in any and even during challenging business scenario. They have succeeded in creating a deeper, specific and relevant input to the automotive sector. Highly recommended, the course was extremely detailed but the faculty made it so easy to understand - Top marks.”

- S.R. Rajan, Vice President-Commercial, TVS Srichakra Limited.

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