The Benefits of Hedge Management Using ETRM Software

Inventory management is an important function of an energy or commodity trade and risk management software (ETRM or CTRM). Businesses, therefore, should consider integrating it with their system at the time of implementation to avoid reconfigurations and changes in processes later. This will ensure you get the right inventory valuations, one version of truth, and enhanced risk management capabilities. 

Ideally, smart inventory management, demand forecasting and planning, contract management, data management as well as e-procurement essentially form the pillars of a successful oil and gas supply chain operation. Undoubtedly, modern ETRM+ERP (enterprise resource planning) systems focused specifically on the oil and gas industry is transforming businesses.  

Let us understand how ETRMs can help in effective commodity inventory management strategies.

What Does Inventory Management Entail? 

The success of a business dealing in energy or other commodities depends on its capabilities to collect, manage, and make sense of real-time inventory-related information. 

For instance, the priority of marketers and refiners is to deliver the right product at the right time and location. This means traders need to handle their purchases in advance, and schedulers need to keep an eye on the supply chain to ensure timely transportation and logistics. However, there can be gaps in the exchange of information between the traders and schedulers. The need is to accurately capture prices and other cost factors such as differentials, transportation, logistics, demurrage charges, product regarding, and so on for precisely calculating the settlement. Thus, the bottom line is to use real-time reporting for effective inventory management. 

Challenges in Inventory Management When Using Legacy Systems  

Many businesses still rely on spreadsheets or manual legacy systems for inventory control and management. However, this may lead to various drawbacks in trading, accounting as well as risk management including

  • Reduced accuracy, speed, and agility in decision-making

  •  Errors in trade capture

  • Ineffective time and resource management of your team who can instead work towards productive tasks

  • Loss of information 

  • Incorrect data management de to labour-intensive tasks 

Effective Inventory Management Using an ETRM

Effective inventory management software along with an ETRM ensures accountability and productivity among the team members. How? A scalable solution that tracks the entire inventory lifecycle at one place in real-time utilises processes and tools to track indirect materials that can help in reducing tool loss, downtime, as well as expensive manual tasks. This means you get complete control and visibility of your front, mid, and back-office operations. 

Following are the ways in which an effective inventory management software coupled with an ETRM or CTRM can help. 

  • Automate net forward and netback calculations, helping evaluate sales margin and profitability

  • Re-evaluate current and future inventory based on the operational data 

  • Offer inventory valuation techniques including FIFO, and so on for calculating accruals correctly. 

  • Evaluate renewable credits 

  • Provide real-time reporting of weighted sales prices and costs to help you identify useful data. 

Real-time inventory control and management, thus, translates to reduced time and errors, scalable operations, optimised risk management, as well as enhanced control over your portfolio. 

Inatech’s ETRM solutions for the oil and trading industry are equipped with effective inventory management software and automate and optimise other functionalities including risk management, trading, contract management, scheduling, and so on.  To know more, visit Techoil