{"id":277,"date":"2026-10-21T13:28:29","date_gmt":"2026-10-21T20:28:29","guid":{"rendered":"https:\/\/scmwithsekharv.com\/?p=277"},"modified":"2026-10-21T13:31:31","modified_gmt":"2026-10-21T20:31:31","slug":"commodity-buying-when-the-market-sets-the-price-can-the-supply-chain-manager-still-create-value","status":"publish","type":"post","link":"https:\/\/scmwithsekharv.com\/?p=277","title":{"rendered":"Commodity Buying: When the Market Sets the Price, Can the Supply Chain Manager Still Create Value?"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><em>Supply Chain Transformation Through Executive Practice<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>A question from my CSCP classroom<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cWhat can a Supply Chain Manager do when purchasing commodities like Rubber, Coffee, Sugar or Cotton?\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The question came from one of my CSCP students.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">His argument was straightforward. Commodity prices are largely determined by market forces. Purchasing managers cannot dictate those prices. Their apparent choice is to buy during periods of seasonal abundance, accumulate inventory and hope that the savings compensate for carrying costs.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cWhere is the challenge?\u201d he asked.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">I disagreed.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">My years of involvement in natural rubber procurement in India, followed by my responsibilities as CEO of a tyre manufacturing company in Sri Lanka, had taught me that commodity purchasing can be one of the most strategically demanding areas of supply chain management.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The buyer&#8217;s responsibility is not limited to negotiating the purchase price.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It includes understanding the commodity ecosystem\u2014and finding ways to improve its performance.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>1. Understanding the commodity before negotiating its price<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Natural rubber is an agricultural commodity. Its availability and price are influenced by production cycles, seasonal variations, weather, inventories, international trade and market expectations.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A competent procurement professional must understand these forces.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But merely predicting a favourable buying season is not sufficient.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Consider the questions that must be answered:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>What is the likely availability of rubber during the coming months?<\/li>\n\n\n\n<li>How much inventory should the company carry?<\/li>\n\n\n\n<li>What are the implications for working capital?<\/li>\n\n\n\n<li>Should domestic and imported rubber be combined in the procurement strategy?<\/li>\n\n\n\n<li>How can the company protect itself against supply disruptions?<\/li>\n\n\n\n<li>Can supplier development improve the availability of higher-quality material?<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The objective should be to optimise the total procurement outcome\u2014not merely obtain the lowest price on a particular day.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>2. When a procurement manager influences an official publication<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">During my tenure with Dunlop India, I noticed a problem in the Rubber Board&#8217;s reporting of natural rubber prices.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The published information treated the price of RMA 5 grade rubber on par with ungraded rubber.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">I believed this practice needed correction and formally represented the issue to the Rubber Board.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">On October 9, 1990, the Board&#8217;s Deputy Director (Marketing) wrote to me confirming that the matter had been examined and that the practice would be discontinued in its publications, including <em>Rubber Statistical News<\/em>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Why does this matter?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Because reliable market information is fundamental to rational procurement decisions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A supply chain professional who understands a commodity deeply can contribute not only to his company&#8217;s purchasing decisions but also to the quality of information available to the industry.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This was a lesson I never forgot.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>3. Small growers can become strategic partners<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Another opportunity arose through the Rubber Board&#8217;s efforts to support small rubber growers.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">We participated in initiatives involving procurement directly from Rubber Producers&#8217; Societies.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This offered opportunities to build stronger relationships with growers, support their access to established industrial buyers and develop a more dependable procurement network.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There was another interesting dimension.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Some rubber growers were also customers for the tyres manufactured by our company.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Thus, a procurement relationship could also strengthen the company&#8217;s standing in the marketplace.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">On June 30, 1990, the then outgoing Chairman of the Rubber Board, wrote personally to acknowledge my cooperation in implementing the Board&#8217;s plans and programs.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The lesson was clear.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Supplier relationships are not merely transactions. They can become strategic assets.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>4. Why buffer stocks deserve scientific analysis<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Commodity purchasing is closely connected to inventory policy.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In an article titled <em>Natural Rubber Stocks \u2014 Why Growers&#8217; Brinkmanship?<\/em>, I analysed the behaviour of the Indian natural rubber market during 1989\u201390.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The article examined seasonal production, consumption, stock availability, market releases and price movements.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">My argument was that reducing inventory norms without adequately considering the entire supply system could create unintended consequences.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These included shortages, speculative pressures, deterioration in quality and difficulties for smaller rubber-consuming enterprises.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The analysis also distinguished between operational inventory and buffer stocks maintained for broader market stability.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This distinction remains relevant.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">An inventory policy that appears efficient when measured solely by stock reduction may be ineffective when judged by service continuity, production stability and total supply chain cost.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Inventory is not inherently wasteful. Its value depends on the risk it protects against and the cost of maintaining it.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>5. Taking commodity strategy beyond national boundaries<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Years later, as CEO of a tyre manufacturing company in Sri Lanka, I encountered a different challenge.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Domestic tyre manufacturers faced intense competition from imported tyres, while several essential manufacturing inputs that were unavailable locally attracted import duties.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Natural rubber, however, was produced domestically.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">I saw an opportunity to connect the interests of local tyre manufacturers, rubber growers, factory employees and policymakers.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Working with representatives of the rubber-growing industry, I participated in initiatives highlighting the importance of a competitive domestic manufacturing sector.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">At a conference commemorating 175 years of natural rubber cultivation in Sri Lanka, I advocated reducing import duties on essential manufacturing inputs that were not locally produced.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">My plea was that a more competitive tyre industry could manufacture more tyres, consume more locally produced rubber and support domestic employment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The proposal attracted attention from the country&#8217;s leadership, paving the way for the reduction of the relevant duties.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The broader lesson was that commodity procurement expertise could contribute to industrial policy and supply chain competitiveness far beyond the purchasing department.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>6. Quality, supplier development and sustainability<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A procurement manager should also help suppliers improve their capabilities.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In natural rubber procurement, this included encouraging improvements in processing, supporting smaller producers in upgrading quality and exploring import substitution through the development of specialised rubber grades.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Environmental responsibility was equally important.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Technically specified Rubber processing involved generation of wastewater, and inappropriate effluent disposal can damage surrounding communities and water resources.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">I therefore made environmental practices part of my assessment of suppliers and opposed irresponsible discharge of processing effluents.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Today, such initiatives would be discussed under responsible sourcing, supplier sustainability and ESG.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The underlying principle is much older:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>A purchasing decision should consider the consequences of how a material is produced\u2014not merely its price and specifications.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>7. Reputation is another return on procurement excellence<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There is a less obvious benefit to responsible commodity procurement.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A company known for professional integrity, constructive relationships with growers, informed engagement with public institutions and reliable commercial conduct can strengthen its reputation across the business ecosystem.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">During my career, I found that this credibility helped in relationships extending beyond suppliers\u2014including financial institutions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Reputation cannot replace financial performance.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But it can reinforce confidence in the enterprise.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>The lesson for today&#8217;s supply chain professionals<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Commodity procurement is not a passive activity dictated entirely by market prices.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It calls for a combination of analytical ability, commercial judgment, technical knowledge, relationship management, strategic thinking and environmental responsibility.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The purchasing manager must understand not only what the commodity costs, but also how the market works, how suppliers operate, how inventories affect stability, and how sourcing decisions influence the wider ecosystem.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The next time someone says that commodity purchasing offers little scope for innovation, I would ask a different question:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>If a supply chain professional can influence supplier capabilities, market information, public policy, inventory resilience and environmental practices, what greater challenge could the profession offer?<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That is why I have always regarded commodity procurement as a strategic responsibility\u2014and not merely a purchasing function.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Lessons from real-world executive experience in procurement, manufacturing, leadership and supply chain transformation.<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>SCMwithSekharV.com<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Supply Chain Transformation Through Executive Practice A question from my CSCP classroom \u201cWhat can a Supply Chain Manager do when [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":282,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[79,80],"tags":[85,15,16,86,83,37,66,82,84,81,18,45],"class_list":["post-277","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-supply-chain-transformation-through-executive-practice","category-strategic-procurement-supply-chain-transformation-through-executive-practice","tag-commodity-procurement","tag-cpim","tag-cscp","tag-ctsc-2","tag-government-relations","tag-inventory-management","tag-natural-rubber","tag-responsible-sourcing","tag-strategic-sourcing","tag-supplier-development","tag-supply-chain-resilience","tag-working-capital"],"mb":[],"mfb_rest_fields":["title"],"_links":{"self":[{"href":"https:\/\/scmwithsekharv.com\/index.php?rest_route=\/wp\/v2\/posts\/277","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/scmwithsekharv.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/scmwithsekharv.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/scmwithsekharv.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/scmwithsekharv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=277"}],"version-history":[{"count":1,"href":"https:\/\/scmwithsekharv.com\/index.php?rest_route=\/wp\/v2\/posts\/277\/revisions"}],"predecessor-version":[{"id":283,"href":"https:\/\/scmwithsekharv.com\/index.php?rest_route=\/wp\/v2\/posts\/277\/revisions\/283"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/scmwithsekharv.com\/index.php?rest_route=\/wp\/v2\/media\/282"}],"wp:attachment":[{"href":"https:\/\/scmwithsekharv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=277"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/scmwithsekharv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=277"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/scmwithsekharv.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=277"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}