WHITE PAPER

ADDRESSING COMMODITY MARKET

CHALLENGES WITH DIGITALIZATION
ENABLED BY PLATFORM TECHNOLOGY
Addressing Commodity Market Challenges With Digitalization Enabled by Platform Technology A ComTechAdvisory Whitepaper

NON-STOP MARKET CHALLENGES

The pace of change in the global commodity markets is accelerating and historical
relationships among buyers, sellers and traders, and even the markets in which they operate,
are being interrupted, reformed and reshaped at an ever-increasing pace. Trade wars, military
conflict, climate change initiatives, regulatory mandates, sustainability and even as recently
demonstrated, market shocks brought about by disease pandemics are shifting supply sources
and demand patterns and interrupting industrial output, forcing commodity trading companies
to adapt in almost real time.

Though many of these challenges may be short-
lived, countless longer lasting structural changes are
buffeting global commodity markets:
• New trading venues and exchanges are being
created, and new instruments launched across
virtually all commodities, particularly in China and
surrounding countries. Automated trading is an
increasingly large proportion of trades in many
markets - particularly more mature markets where
local price variations are being eliminated (e.g.
European power markets) - reducing trade margins
and arbitrage opportunities. Maintaining profitability
in these markets requires cost reductions throughout
the supply chain by improving efficiencies.
• Increasing regulation and intrusive oversight
in the form of a myriad of market rules (often
regional and/or local in extent) are impacting all
aspects of commodity supply chains and trade,
such as IMO2020 for marine fuels sulfur content.
Stakeholders, including banks, investors and
financiers, are exercising more oversight and
demanding more assurances that their client
companies are engaging in appropriate risk
practices and have the systems and process in
place to limit downside market risks.
• Environmental regulations have become more
pervasive, particularly among Western governments
as the movement to a low carbon future accelerates.
Limitations on CO2 are impacting virtually all
commodities classes, including hydrocarbon fuels,
renewable energies, and even agricultural and
softs products such as proteins, animal feeds and
so on. The new environmental rules are forcing
a restructuring of asset portfolios, increasing
compliance costs and often reducing financial
returns on existing assets.
• Changing consumer demand is favoring
commodities and products that can demonstrate
socially responsible and sustainable supply chains
– e.g. green power, commodities produced without
child labor or deforestation etc. Addressing these
new market influences requires investments in
traceability solutions and may require alternative
sources of supplies or new methods of production.

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 Addressing Commodity Market Challenges With Digitalization Enabled by Platform Technology A ComTechAdvisory Whitepaper

Recognizing these and numerous other challenges,
progressive commodity-centric firms, from traders to
CPGs, are increasingly undertaking “digitalization”
initiatives - leveraging existing and emerging technology
(such as ML and AI) to gain greater market insights,
improve business agility by streamlining business
processes, accelerating information flow and providing
their commodity procurement and trading groups the
tools necessary to optimize their operations across the
breadth of their markets and supply chains.

LEGACY SYSTEMS ARE PROVING

INADEQUATE
Unfortunately, the traditional technology infrastructures that support commodity traders,
merchants and producers are proving largely inadequate in these digitalization efforts. In
particular, the CTRM and CM products common to these markets, and usually comprised of
monolithic code bases, are proving to be particularly inflexible and limiting in digitalization
projects.

These systems are purpose-built software products
modeled to mimic and capture data from the highly
specific business processes of the customers they
serve. As the vendors of these products have tried to
continuously expanded their customer bases over the
last twenty-plus years, these systems have become
increasingly complex as new functionality has been
added to keep up with changing market rules and
conditions and address new markets or new and more
complex commodities. As these new requirements
are “baked-in” to those existing systems, the data
structures and business logic grows exponentially
complex, increasing the costs and difficulty of
maintaining and upgrading those systems for their
users. For customers that transact in a limited number
of commodities or markets, these one-size-fits-all code
upgrades associated with these monolithic systems
are particularly burdensome and continually increase
system complexity without providing any discernible
value.
Perhaps most critically though, and aside from rapidly
rising support costs and increasing difficult and
time-consuming maintenance and upgrade efforts,
these older technology platforms are also proving
to be a roadblock on the path to digitalization. Based
on extremely complex relational databases with
oblique table structures designed and optimized for
performance, not data access, the critical information
contained within these CTRM/CM systems is cloistered
and essentially unavailable to users outside of screen
dumps, canned reports or very limited APIs.

© Commodity Technology Advisory LLC, 2020, All Rights Reserved.

Addressing Commodity Market Challenges With Digitalization Enabled by Platform Technology A ComTechAdvisory Whitepaper

Advanced analytics, a goal common to most
digitalization efforts, can be particularly an issue
for these systems. Few if any CTRM/CM solutions
supply advanced capabilities to model and optimize
supply chains and the physical assets that comprise
them. As such, users are often left to either develop
custom data extracts or manually input pricing and
position information from those systems into analytics
solutions, either homebuilt or 3rd party. Unfortunately,
these processes are error prone and/or can impart
considerable latency into the analytics process,
rendering the analysis suspect and outdated, and
undermining the return on the digitalization investment.

A NEW APPROACH IS NEEDED

Though many legacy CTRM vendors have sought to leverage cloud deployment to present a more
modern approach to potential buyers, the reality is that most of these “new” cloud applications
are simply a re-platforming of existing monolithic code. Without having been designed initially
to run in the cloud, they are unable to take advantage of “cloud native” capabilities such as on-
demand processor scaling to increase performance, rich APIs that permit rapid integration with
both internal and external data sources and systems, and seamless upgrades and maintenance.

While a few recent CTRM market entrants have implementation projects.

developed multi-tenanted cloud solutions that can
provide the advantages found only in products developed
specifically to run in the cloud, these applications are
limited in their commodity coverage and functional
scope. Market experience with these systems indicates
they may be a workable solution for a smaller company
that trades one of a very limited range of commodities
and in a specific market region. Unfortunately, as those
user companies attempt to scale their businesses
outside of their designated commodity and/or market,
they quickly find these solutions are unable to address
their new requirements - forcing that company to either
build custom software or find one or more alternative
systems; and in the process, burdening their resources
with time consuming and costly software selection and
The market has also seen the introduction of
software “platforms” in recent years. With a platform
approach, the vendor provides an open architecture
solution (either via the cloud or installed onsite) that
addresses common though generally non-industry
specific business processes, along with the technical
infrastructure necessary to support and administer the
system. Some platform vendors may also provide some
industry-specific capabilities in the form of applications
or micro services for larger markets (such as financial
services); however, very few if any platform vendors
have the industry knowledge to address the wide
variety of very specific capabilities required by physical
commodity traders. For customers operating in the

© Commodity Technology Advisory LLC, 2020, All Rights Reserved.

 Addressing Commodity Market Challenges With Digitalization Enabled by Platform Technology A ComTechAdvisory Whitepaper

physical commodity markets, these established platform
vendors will provide a toolkit with which their clients can
design and build their own custom capabilities.
The ability for customers to use their own resources to
extend the capabilities of the platform as the need arises
does reduce reliance on costly vendor support and is
a key advantage over traditional monolithic software
systems like legacy CTRM/CM products. This ability to
create and quickly integrate new capabilities improves
business and technology agility and helps ensure the
customer’s critical trading systems can support new
business priorities. However, while software platforms
have proven successful in financial trading markets,
their developers’ lack of knowledge of, and inability
to support, common capabilities required by physical
commodity traders and merchants has limited their
success in these markets.

ADDRESSING THE SHORTCOMING OF

TRADITIONAL ETRM/CTRM – EKA’S
APPROACH
Several years ago, Eka recognized the growing limitations of traditional CTRM/CM solutions…
including their own. With rapidly changing global commodity markets and the need for their
customers to digitalize their businesses to in order to remain competitive, the company adopted
a new strategy to create a cloud-based commodity market software platform that could address
the legacy issues of CTRM/CM and become a “hub” of data and information from internal
and external sources (many via pre-built integration apps). When combined with additional
capabilities in advanced analytics, including AI, the platform can then become the enabler of a
digitalized enterprise – automating manual processes, accelerating data and information flow,
and reducing or eliminating the use of spreadsheets.

The result of Eka’s multiyear development effort is
the Eka Commodity Platform – a new solution and
approach that leverages the flexibility and extensibility
of a platform; yet one that addresses the very specific
business process complexities found throughout the
commodity trading and commodity management
markets and along their value chains.
Eka’s platform was designed from inception to run in
the cloud, providing the scalability and accessibility
(including mobile access) required by commodity
trading and management companies. Additionally, and
as opposed to non-industry specific platforms, Eka’s
Commodity Platform delivers common business logic
that is endemic to the diverse commodity markets,

© Commodity Technology Advisory LLC, 2020, All Rights Reserved.

Addressing Commodity Market Challenges With Digitalization Enabled by Platform Technology A ComTechAdvisory Whitepaper

providing valuable capabilities and business value “out

of the box”. The company has also invested much of
their development efforts in creating a library of pre-built
apps and services that span commodity production,
sourcing and upstream origination, trading and risk
management, supply chain operations, and numerous
market data interfaces.

The core platform provides embedded workflow

management capabilities, data administration and
security. Using the provided application development
toolkit, users can access that platform via well-
documented and open APIs, providing a clear path
for rapid integration with internal systems or for
development and deployment of custom capabilities.

Eka’s broad library of prebuilt market & commodity-
specific apps (accessible via their App Store) allows
their customers to simply download and deploy new
functionality as their needs change. The Eka App Store
library currently lists more than 50 apps providing
specific trading and risk functionality, digital supply
chain management, financial management and
analytics, and includes commodity-specific algorithms
and workflows that address complex nuances of
multiple commodities. Once an app is downloaded,
customers of Eka’s flagship solution can quickly
implement new functional capabilities or new system
interfaces - giving them the flexibility and agility they
need to address changing market conditions or to
pursue new opportunities at a lower cost and faster ROI
than is possible with traditional CTRM/CM products.
The Eka Commodity Platform allows its customers
to achieve comprehensive integration of the end-to-
end global trading and commodity management process
by streamlining the life cycle of transactions across
orders, logistics and settlement, enabling operational
and financial optimization and better management of
financial risk, hedge accounting and compliance.
As companies seek to improve their competitiveness,
agility and financial performance through the process
of digitalization, new and innovative technologies are
always compelling. However, without that technology
having been developed with a deep understanding of
the complexities of the markets they serve and the very
specific challenges facing those market participants -
such as that in Eka’s Commodity Platform - the return
on investment envisioned by a digitalization project will
likely fall well short of its target.

© Commodity Technology Advisory LLC, 2020, All Rights Reserved.

ABOUT EKA

Eka’s ETRM solution is driven by a cloud-native plat- scale at will, go live on time and budget, and take
form that allows businesses to manage the entire data-driven decisions.
trading life cycle of Natural Gas and LNG in diverse
energy markets. The platform leverages enterprise For more information, visit www.ekaplus.com
apps built for LNG and Natural Gas markets to help
businesses execute extremely complicated itinerar-
ies, hedge price risk with confidence, and improve
operating margins with better forecasting of Natural
Gas volumes coming in and out of physical plants.
Built on a new age architecture, Eka’s multi-asset
platform is built on AI rich algorithms, domain-niche
analytics, and Blockchain that empower businesses
to stay on top of dynamic markets by letting them
ABOUT
Commodity
Technology
Advisory
LLC
Commodity Technology Advisory is the leading analyst organization covering the ETRM and
CTRM markets. We provide the invaluable insights into the issues and trends affecting the
users and providers of the technologies that are crucial for success in the constantly evolving
global commodities markets.

Patrick Reames and Gary Vasey head our team, whose combined 60-plus years in the energy
and commodities markets, provides depth of understanding of the market and its issues that is
unmatched and unrivaled by any analyst group.

For more information, please visit:

www.comtechadvisory.com
ComTech Advisory also hosts the CTRMCenter, your online portal with news and views about
commodity markets and technology as well as a comprehensive online directory of software
and services providers.
Please visit the CTRMCenter at:
www.ctrmcenter.com

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