World Grain - November 2009 - 64

GRAINOPERATIONS

some type of merchandising or marketing function leading the effect.
RISK MANAGEMENT
Risk management of grain has significant challenges to the communication
between merchandising and operations.
Paurus and Dusek emphasized that
this has never been more apparent than
during the past two years of unprecedented volatility in the grain markets,
when flat market prices of all commodities doubled or tripled, then retreated
by more than 50%.
"Working capital availability has required organizations to do things differently than in the past," Dusek said.
"The credit risk attributed to some customers has forced some organizations
to re-evaluate who they sell to and how
much credit to extend.
"Some of these have had a significant
effect on how much company-owned
grain you will store and how much
grain you can have as hedged and unsold. Plans were made to carry grain
for a period of time, and because working capital was needed, grain was sold
to get cash."
He said that as these issues surfaced,
it was more important than ever for
good communications between merchandising and operations regarding
grain quality, type of shipments, timing
of shipments and the expectations for
each department.
RESOLVING CONFLICT
Paurus and Dusek agreed that resolving conflict and improving communication between merchandisers and
operations managers are complicated
matters. While there is no one-size-fitsall solution, they did recommend that
companies look at the following steps:
 Know what the goals of your organization are. Determine if they are
monetary, customer service, innovation, etc. These must be prioritized
to make an informed suggestion to
merchandising.
 Get everyone to start out on the
same page. One of the best ways is
66

to define the issue in monetary terms.
Everyone understands when additional
revenue exceeds cost to produce. Likewise, everyone understands when additional revenue is less than the cost
to produce. Getting this accomplished
will put merchandising and operations
at the same starting point in resolving

scheduled at times when it is the most
convenient for everyone who needs to
attend. The goal of the meeting, they
said, should be that when everyone
walks out they know specifically what
they are responsible for, the deadline
for accomplishing assigned tasks and
what additional tasks may need to be

The merchant is responsible for revenue enhancement and
the operator is responsible for cost containment, thus it
is easy to see how conflicts may arise.

the conflict. For example, say a merchant wants to sell a spot shipment that
has to be loaded at a specific time. The
buyer will pay an extra penny a bushel
for the shipment time. The operator has
determined that the extra cost is going
to be 1.2¢ per bushel. Obviously, in
the operator's mind, making this commitment doesn't make sense. In this
case, it may help to provide a detailed
analysis to the merchant of where the
additional costs come from, how these
were arrived at, and what assumptions
were made.
 Assuming that everyone agrees
the monetary analysis is correct, you
should then discuss what other issues
may need to be addressed. These could
include: needing to make space for
additional grain being delivered; the
buyer being a consistent customer who
needs this shipment; this is the only
sale available and customers are selling grain for immediate delivery faster
than can be handled in the normal process; and this is the only freight that is
immediately available.
 Determine if there are other goals
that the company must consider beyond
profitability. Some of those may be:
safety, health and environment; customer service; giving certain customers
higher priority; and cost containment.
Paurus and Dusek said one way to
get everyone involved in the process is
to hold mandatory meetings on a periodic basis. The meetings need to be

assigned. The meetings need to be brief
and to the point, led by one individual
who keeps everyone on topic, and attendance must be mandatory.
BENEFITS OF WORKING TOGETHER
Paurus and Dusek said that by providing
a forum for exchanging ideas and information regarding merchandising wants,
operational data and assigning tasks, the
following benefits are attainable:
1. Everyone is working toward the
same goal. This goal should be defined
by the organization. It will be different
for each company, but everyone within
the company will know what it is.
2. As you develop better and ongoing communications, you should reduce stress and unproductive conflicts
within the organization. However, it's
important to remember that not all
conflict will be eliminated, as merchandising and operations still have goals
within their disciplines that may be in
conflict.
3. What ultimately should occur is
that all individuals will develop trust
in each others abilities, and they will
determine who has the best traits to accomplish specific tasks and who moves
into the leadership role.
4. Finally, improved communication
will enhance company profitability and
maintain a strong customer base.
We want to hear from you - Send comments and
inquiries to worldgrain@sosland.com. For reprints of
WG articles, e-mail reprints@sosland.com.

November 2009 / World Grain / www.World-Grain.com

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World Grain - November 2009

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