The Challenges And Benefits Of Process Standardisation For Commodity Traders
Elton John would have us believe that "Sorry" Seems To Be The hardest Word, however those involved in leading process transformation projects in the commodity trading space may beg to differ.
Changing ingrained habits and seeking to eliminate the unnecessary uniqueness within an organisation can come up against strong resistance. Implementing change in any organisation which focusses on 'outcomes' instead of how the desired outcome can be more consistently and efficiently achieved, is challenging. However, by addressing these challenges, organisations can unlock numerous benefits for the business, their employees & their customers.
This blog post explores the opportunities & challenges, and a plan for implementing standardised organisation processes in commodity trading companies.
The Benefits & Challenges of Process Standardisation
Benefits of Standardised Processes
Why focus on a goal of standardised organisation processes and what are the beneficial outcomes for trading companies?
Despite the many challenges to be overcome, implementing standard processes across an organisation will reap significant benefits.
Efficiency and Cost Savings: Significantly increase efficiency, reduce errors, and cut costs. By eliminating unnecessary uniqueness, companies can streamline their operations, making them leaner and more cost-effective.
Improved Compliance and Risk Management: Standardisation makes it easier to enforce compliance with regulations and risk management protocols. This is crucial in an industry where compliance and risk mitigation are paramount.
Scalability and Adaptability: Standardised processes are more scalable and adaptable to changes in market conditions or business needs. They allow companies to quickly pivot or expand into new markets without having to reinvent the wheel. Onboarding new employees or utilising redundant capacity in other parts of the organisation becomes simpler when all processes are aligned, and when employees work the same way the organisation flexibility is increased.
Employee Empowerment: Standardisation provides a clear roadmap for success, and employees can focus on innovation and customers rather than reinventing the wheel with each trade. They can become more empowered and adaptable. The business becomes less reliant on key individual contributors (and reduces the continuity risk if they leave).
Improved Performance: Not only should standardisation lead to improved productivity and reduced operational costs, the consistency of the services and outcomes delivered to customers will improve and further engage them to the business.
Enable Digitalisation: Standard & aligned processes running across an organisation are a necessary requirement to enable an organisations digital transition. They are the necessary foundation for automating repetitive tasks and are required to enable integration and interfacing with external systems for the digital exchange of data.
Enable Offshoring / Outsourcing models: Successful business outsourcing or offshoring initiatives are dependent on standard processes running across an organisation. Defined process handovers between teams and functions, internal and external, ensure a smooth workflow with clear responsibilities and accountabilities for tasks that need to be performed.
Process Transformation Challenges!
Organisations which focus almost exclusively on the ‘outcome' to be achieved (at the expense of the process to achieve an outcome consistently) typically have multiple processes for the same activities across different business units, functions, teams and individuals. This approach impacts the organisation performance and cost of execution. It brings several challenges to be overcome when seeking to design and implement global process standards.
Unnecessary Uniqueness: One of the primary hurdles in standardising processes is the presence of “unnecessary uniqueness.” Commodity trading companies often have a tradition of creating custom workflows for different commodities, regions, or even for individual teams. These internal silo's and process uniqueness can lead to inefficiency, as it requires separate training, documentation, and system adaptations. Process uniqueness often brings an over-reliance on key individual contributors and can be used as a source of influence within the organisation.
Employee Reluctance to Change Work Practices: People tend to resist change, and employees in commodity trading companies are no exception. They might feel threatened by the prospect of standardisation of their work activities, fearing that it could disrupt their familiar routines or even jeopardise their job security. This resistance can be a significant barrier to process standardisation & business transformation.
Systems Alignment: Aligning the various systems and software used in commodity trading is another major challenge. Different teams might be using disparate software applications to execute similar processes, and/or using the same application in subtly different ways according to a teams unique processes. Integrating them into a connected IT ecosystem can be a time consuming and expensive problem if there is no standardisation of process and supporting procedures.
Process Governance: Commodity trading companies often operate in a matrix-like structure, with multiple departments, regional offices, and even subsidiaries. Ensuring that standard processes are consistently implemented across all these entities requires a significant degree of organisational integration and process governance.
The Unique Challenges of the SME Trading Company
Compared to larger commodity trading companies, SME’s in the trading industry may have further unique benefits and challenges when it comes to designing and implementing a standardi process framework. Let's take a look at how these differences might apply:
SME Challenges:
1. Resource Limitations: SMEs often have limited resources, both in terms of finances and human capital. Standardisation initiatives may require investments in technology, training, and process redesign that could strain the limited budgets of SMEs.
2. Resistance to Change: Employees in SMEs might be even more resistant to change, as they often play multiple roles and have grown accustomed to flexible and informal processes. Convincing them of the benefits of standardisation might be a greater challenge.
3. Access to Technology: SMEs may have less access to advanced technology solutions, making systems alignment and integration more difficult. They may need to carefully choose cost-effective IT solutions.
SME advantages from process standardisation:
1. Agility and Adaptability: SMEs can often implement changes more swiftly than larger corporations. Standardisation can make them more agile, allowing them to pivot and adapt to market changes rapidly.
2. Competitive Advantage: By streamlining their processes, SMEs can gain a competitive edge in the market. They can compete effectively with larger players by offering more efficient and cost-effective services.
3. Cost Savings: Standard and streamlined organisation processes can lead to significant cost savings. For SMEs with limited budgets these savings can have a more substantial impact on the bottom line.
4. Compliance and Risk Management: Compliance is critical in trading, and standardisation can help SMEs meet regulatory requirements more efficiently. It can also enhance risk management practices, reducing exposure to potential liabilities.
5. Access to Benefits of Scale: Standardisation and alignment to process best practices brings SME's access to the many benefits scale which their larger competitors currently enjoy. A strong process framework allows SME's to build scale digitally across their organisation, with an increasingly flexible workforce that can collaborate and work together seamlessly from any location. Access to talent and capabilities can be sourced flexibly (in house or outsourced) and the organisation can be quick to scale and adapt to changing market conditions.
While SMEs in the trading industry may face resource constraints and heightened resistance to change, they can leverage their agility, gain competitive advantages, and achieve cost savings more quickly and effectively than their larger competitors. The benefits of standardisation are not exclusive to large enterprises and can be harnessed by SMEs to thrive in a competitive market.
The Plan
So how can an organisation plan and move to an environment where processes are standardised and executed consistently by employees and other stakeholders?
Planning for change and transformation is complex. Even for organisations that have the capabilities & resources to manage and execute change there is always a challenge in backfilling roles or, for already time stressed resources, to be fully engaged in a transformation program.
Engaging an experienced and expert 3rd party such as Crest Trade Services can bring benefits in both reducing project timelines to implementation (& value creation) and increasing the probability of a successful transformation.
Once a decision has been taken to commence an organisation process transformation, what would be some of the key areas to focus on?
Assess Current Processes and Develop the ‘To-Be’ processes:
Start by conducting a thorough assessment of your existing processes. Identify areas of unnecessary uniqueness, bottlenecks, and inefficiencies. Make unnecessary processes redundant and build out the ‘to-be’ processes, validating the design with key stakeholders.
For SME's ,or larger organisations, that do not currently have a strong process framework there is a significant opportunity to speed up the cycle (and reduce project costs) by adopting, or adapting to, an existing process framework and process 'best practices' into their business. This approach allows SME's, in particular, to access the benefits and value of standardisation with speed and agility.
Engage Employees:
Involve employees in the transformation. Nobody knows better the day-to-day frustrations in executing work tasks, the current process inefficiencies and opportunities, and the subtle process and exceptions workarounds that the team has adopted, than those responsible to execute them daily. Encourage their feedback and suggestions.
Clearly communicate the expected benefits to the organisation and the employees. Highlight the ‘what's in it for me’ opportunities that it brings to an employee. Address any employee concerns on the potential impact on their role or position in the organisation.
Establish Clear Governance:
Develop a robust governance structure to oversee the implementation of standardised processes. Ensure that there are accountability and oversight mechanisms in place.
Create a Unified IT Ecosystem:
Review the current IT ecosystem and planned investment budgets. Identify and invest in systems, or functionality enhancements, which can enable seamless integration with other applications and can enable process automation and electronic data transfer.
Seek, where practical, to configure process workflow in the system applications used so that key process steps can be made visible, with performance measured (KPI’s) and reportable. The new or ‘to-be’ process framework should guide decisions on configuration or tactical investments in functionality to automate processes where feasible.
Conclusion
While the road to standardized global processes in commodity trading companies may be challenging, the rewards are well worth the effort.
By addressing issues like unnecessary uniqueness, employee resistance, systems alignment, and organisational integration, companies can achieve greater efficiency, compliance, scalability and consistency of performance. Employees, in turn, can become more empowered and adaptable, driving innovation and growth in a dynamic industry.
Increasing process standardisation, and strong governance, also brings increasing opportunities to offshore or outsource specific processes to reduce an organisations cost of execution further, while also providing access to flexible resources and capabilities.
While process transformation is never easy to implement, in the ever-changing world of commodity trading a focus on ‘Process’ is key to enable a more profitable, and digital, future for the organisation.
Contact Crest Trade Services to start a conversation on your trading & shipping operations transformation opportunities: info@crestts.com
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