Many firms are confronting challenges associated with costs of good sold (COGS) from dynamically priced inputs or finished goods. We have developed 8 simple questions for a CFO or CPO to determine whether commodity management for dynamic markets may be an appropriate area to focus on:

• Do you find earnings (for a CPO) or procurement costs (for a CPO) easier to manage within plan for predictable earnings or margin when input prices are rising/falling and harder to manage within plan in the opposite direction?
• Do you find earnings or costs have some inputs that have significant cost variation impacts (overpriced inventories/volatile COGS) associated with demand or production forecasting errors?
• Do you find the sales pricing cycle (how often you change prices) causes issues with procurement cost management(input costs vary more and more frequently than sales prices or vice versa)?
• Do external factors (weather, commodity markets, other inputs) cause changes in demand or material planning or revenue forecasts that are not accounted for in current forecast or revenue models?
• Does the amount your competitors hedge or do not hedge inputs have the potential to cause competitive impacts in your sales prices and margins?
• Do you have significant accounting write downs/mark ups on raw material or finished goods inventories caused by variation in reference prices?
• Do you experience unanticipated collateral  or margin calls for hedging transactions?
• Do you have revenue declines caused by COGS changes that do not impact your margins or earning that you need to explain?

​If you answered yes to one or more of these questions, the addition of dynamic commodity management methods to your strategic sourcing operating model is likely to improve your results