InnoVites - It's the copper, stupid!

Freitag, 04 September 2020 16:24

It's the copper, stupid!

Written by Albert Groothedde

Copper is the new gold

Simply put: producing cables is about packaging (insulating) of highly conductive materials. These conductive materials, such as copper and aluminum, are relatively expensive and drive most of the material costs of a cable. The costs of copper easily run up to 90% of the material costs of a cable.
It’s the reason that cable manufacturers and distributors do care about material losses in production and cutting.
However, there is an even more significant business issue with the use of copper and aluminum. It’s their extremely volatile prices.

Capricious Copper prices

June 23, 2008, the price of one pound of copper was $3.88 (Comex). Just 6 months later, December 8, 2008, the price plunged to $1.42. A loss of 63%. Imagine you are the CFO and have about 2 months’ worth of inventory in your factory or warehouse that loses half of its value…

The copper price reached its all-time high of $4.58 on January 31, 2011, gaining over 200% in just two years.
These examples clearly demonstrate why cable manufacturers and distributors implement strategies to manage the risk of volatile material prices.
Sample strategies are:

Pass the risk of changing copper prices to customers, by adjusting the cable prices for the actual copper prices at invoicing
Pass the risk to a bank (at a cost) by hedging against the copper prices
Minimize the impact of changing copper prices by frequently (mass) updating list prices

Administrative overhead

These strategies all have their own advantages and disadvantages. What they have in common is the administrative overhead that comes with their implementation. All strategies have to deal with varying materials, material weights, price units for materials and the cable, varying currencies, different rules that are applicable for different customers, etc.

InnoVites CableERP Precious Material Module

InnoVites CableERP offers the Precious Material module that is designed to minimize the overhead related to copper pricing and bring full transparency. This also eliminates the risk of human mistakes that easily happen in the often complex calculations.
The InnoVites Precious Material module can be integrated to LME, Comex, DEL, to have a fully automated material pricing in place.

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