Free «Commodity Council» Essay Sample

The ThreadsTireCenter has over a long period of time incurred lots of expenses as a result of unorganized purchases which have made the company incur some avoidable losses. It was therefore in this view that the company saw it necessary to establish a Commodity Council in the organization to reduce the expenses resulting from random purchasing by the company.  In order to have an effective and strong strategic sourcing function in the Threads Tire Centre, it was necessary for a commodity council to be constituted. Being the Chairman of the Cross-functional Commodity Council for a large organization, I will ensure that such a council achieves its intended objectives and goals.

The goal and mission of the Thread Tire Center Company is to bring together the most capable individuals in the field of the tire industry and auto service. The company has an ultimate goal of giving its clients the greatest value for their money in a courteous, competent and professional way. The Commodity Council’s principles in the Thread Tire Company are that all members working in it must be of unquestionable integrity and honesty. The company deals in tires of various metric to inches. The company has divided its commodity sourcing matrix into four different categories, namely: Commodity, Standard, Bottleneck and strategic depending on their supply market complexity and business impact. The sourcing principles of the tire company focus on three steps namely maximizing content for post consumer recycled products, avoiding purchasing from controversial sources and lastly by seeking to increase the number of products which are certified by credible third parties.    



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Among the objectives of the Commodity Council will be to provide expertise in the management, contradicting, engineering, among others in order to support the acquisition of tires, other logical groupings of tangible goods or products. Being the Chairman of a cross-functional commodity Council in my organization, I will ensure that members of the council are assigned specific roles, ground rules for the council activities are defined and the Council’s communication process is effectively set up. The commodity Council in the organization will therefore serve as a gateway for the parts and services which are aligned along the logical commodity lines. This will ensure opportunities for cost reduction, improve strategies of sourcing the tires and help in fostering and sustaining of relationships with the suppliers.

Given the fact that each and every commodity has got is own unique features or characteristics, it may not be possible for one individual to understand it completely. It is therefore vital that various members of the commodity council are assigned specific roles to play. Since strategic sourcing is normally a collaborative approach, more people should be hired to support the Chairman of the Commodity Council in order to deliver best results for the organization. People from relevant functions should therefore be employed to help the chairman in running the Commodity Council.

Specific roles of members of the cross-functional commodity council in the organization

The Auto-Tire commodity council will comprise various departments chief among them the finance, contracting, technical and procurement departments. Each of the departments will have a head with several assistants according to the frequency of purchases and as per the volumes. The procurement department will be responsible for gathering information comprising of short listed suppliers of the tires based on their prices and quantity. The overall leader of the procurement department will thus be responsible for mobilizing the team for the contacts of the supplier which includes among others, the advertising quotations, the tendering process and the proposals. This will ensure that an environment of equality is established. The entire process will be supervised by representatives from other departments.

The technical department, on the other side will be responsible for the verification of the target quality intended to be presented for the market. Among the verifications will include the verifications of laboratory tests for the contents of chemicals which will include the water and acid quality. The department should ensure that the cells and the tires are 100% effective through the determination of the presence of any physical effects. Moreover, the batteries to be sourced should have a stamp of national quality for the manufacturing source. The results from the department should then be passed to the contracting department. The contacting department, upon satisfaction will contact the supplier of the tires to collect the first batch of the tires with the relevant delivery orders and invoices which must match the price that was negotiated and the related discounts. These are then presented to the finance department who ill verify the products then co-authorize payments and allow the procurement department to issue a delivery contract or a tender for the supplier. The whole team should be involved in the vetting process based on reports on an earlier agreement delivered during the time frame or in quantity.

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Ground rules for commodity council activities

A spend analysis should be carried out by the company which will comprise of the company’s previous records on the purchases of the tires and the suppliers costs for the purchases. Extra expenses incurred either by the supplier or the company should also be reflected in the spend analysis. In order to ensure that the company gets quality goods in their best conditions, fair selection should be done to ensure that suppliers which will enable the company to incur minimum costs when purchasing the tires are chosen. This will also involve ascertaining whether the transport costs lies with the company or the supplier, the costs of insurance and liability during the transportation of the goods. This is aimed at preservation of business intentions with a view of making profits (Moore, 2007).

In order to guarantee the best supplier for the company, supplier analysis should be conducted in order to guarantee the best supplier that is based in terms of their network distribution and its market share. The suppliers’ image and worth is also ascertained through the reputation of the stakeholders that such a company relates with. This will therefore involve the substantiation of the roles played by each supplier in the supply chain management process.

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The processes of the Commodity Council

The processes of the commodity council will involve the procurement process which will include price negotiations, contacting suppliers and sourcing. The samples which are collected are verified for quality by the technical department which is responsible for leasing with the department of contracting basing on the quality assurance results.


A trend of decreasing costs in order to match with the increase in quality of the tires which is based on economies of scale should be given consideration in order to support effective purchasing. This will thus imply that the more the quantity supplied, the more the company will incur more costs. The company, through the commodity Council should therefore ensure that such costs are reduced. This should be done in accordance through well maintained quality standards at very minimal costs of acquiring the tires.  


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