Three Case Studies in Commodities Digitization

April Morgan, SVP, Head of SCS Trade Controls and Operations, StoneX:

StoneX Commodity Solutions is an entity that's wholly owned by StoneX. And we're a bit unique in the marketplace. We're active in the commodity trade places around Ag, commodities and also soft commodities.

But what makes us unique is we're just not a trading company. We consider ourselves a service-based company where we are providing risk management and hedging services to our clients, merchandising logistics, services, and also offering working capital solutions for our clients. Partnering with our clients puts us in the middle of a lot of transactions where we are buying from suppliers and facing customers on the consumer side.

Being a reseller puts us at a disadvantage because we do not have connections to assets at both the origination point and the destination point. We're really relying on our trade counterparties to provide us with the data that we need to get that into our system and then process those transactions through our system.

Because we do not have access to those systems, we receive an enormous amount of data through email. We get, on a daily basis, probably thousands of trade settlements coming through our inboxes. Three of our product lines are high volume, truck-focused, rail car-focused. Think about invoices, bills of lading, settlement statements coming in chunks of 25 trucks, 100 trucks, and you get the idea.

We receive data from destinations that give us settlement data, such as weights, grades, and so on. We need that data to process those shipments against our sales, and also to process those same shipments against our purchases, and inevitably pay those farmers for the grain we have purchased.

When we came to partner with ClearDox, our focus was getting this data into our system digitally. Historically, we have relied on a very capable and very detail-oriented operational team to manually enter all of these truck tickets into our system. This is a very laborious, repetitive process, which means we have to have the right people in those seats. They need to be accurate, they need to be efficient. But it also means taking those individuals away from focusing on risk mitigation for our business (focusing on problem solutions because they're really bogged down by the high volume of just data entry).

Our experience in implementing ClearDox around the solution was incredibly positive. I think I've been a part of many system implementations in my career. This was probably the fastest and smoothest implementation that we have done. I think we went into this project hoping that we would automate 70% of these settlements. And we're already now automating 95% of the trucks that are delivering in this program for us. It's been a huge success story.

Vladimir Zeman, Group Head of Information Systems at Traxys:

Traxys is a metal trading company. We trade raw materials as well as refined metals, but we're also a service provider to many of our customers. We do trade finance, we do off-take agreements (hedging). We have this duality of it to what we do, which is customer focused as well as trading focused.

For us, Commodities Digitization 1.0 was all about getting our information in one place reliably, where we could get the reporting we need, get the outputs we need, be able to analyze our data, view your data, and control our business, basically.

But this didn’t really make our jobs any easier. We just had more data to put in, more information to maintain, in a more-timely manner. That’s challenging, and difficult. And the demand for that information continues to grow both from our internal stakeholders as well as external stakeholders.

This is how we came upon ClearDox. We started looking at how we could take all incoming documents and basically eliminate or reduce the effort to key in all that data. We started thinking about AI and natural language processing. We looked at a few solutions out there. We selected ClearDox because they understood our business.

We rely heavily on the backend of ClearDox. They are basically our pre-processor, the engine that takes all this incoming documentation, these incoming invoices, and turns them into structured data, which we can then do something with in our systems. We've actually developed in-house an application that connects the information we're getting from ClearDox with our CTRM platform, which is a third party commercially available software. And with our document management platform, which is also commercial software.

Our project has been remarkable because we get thousands of invoices across the organization every month. One of our groups reported that just the entry recording piece was taking four to six minutes per invoice, depending on complexity. Now, with ClearDox, we're seeing two to three minutes.

Geetika Arora, Director, Head of North America Oil contracts at Freepoint:

Freepoint is a global and physical financial trading firm. We provide physical supply services and structure solutions to all our counterparties, including hedging, and financing strategies.

I work in physical oil trading. The many oil products that we trade in involve motor transports like barges, vessels, racks, trucks, pipelines and tank storage. Oil contracts are long-form and deal-specific. Their clauses, their general terms and conditions, are very, very lengthy, long form and very detailed.

This was one of the biggest spaces in our firm where we had been spending a lot of time trying to automate as many templates as we could in the deal-entry process. We had been spending quite a bit of time during COVID to see where we could get rid of the repetitive tasks or get rid of manual processes.

My team currently spends a lot of time reading through trade specs, trade recaps, and broker recaps. These are all emailed to us, or faxed to us in some cases. We gather all that data and then we tie it to our deals in our ETRM system. This is a very lengthy and manual process for us. We've been growing quite a bit in our physical oil space, where we've been providing, not just trading on the vanilla deals, but also structured deals. And it becomes important to have accuracy and speed on all of these contracts when we're producing them.

What we decided to do was look at ClearDox and come up with a three-way reconciliation where we are comparing not just our ETRM deal, where our trader has entered the deal in the system, but we're also comparing all economic data to any recaps. That includes the trader recaps, the broker recaps, any email or IM messages that the trader sent us, and then comparing these detailed specs to the long-form contract that we're producing.

Today we have a two-set-of-eyes rule at Freepoint, where the contract analyst produces it and a manager reviews the contract. We thought, can we replace this two-set-of-eyes check with ClearDox becoming that check? And that's exactly what we are doing today.

ClearDox compares three or four documents and tells us what the exceptions are. Where a volume doesn't match or where a mode of transport doesn’t match up, for example. In that case, we do exception management. We provide comments within the platform for anyone who wants to audit the deal. It could be a manager, or someone in operations or the credit department.

The biggest positive has been that ClearDox understands our physical oil business. And they're constantly coming up with new solutions to make things faster and better. We're very happy with ClearDox. And I mean we're definitely using them in other spaces, like invoicing and in the settlements process as well, comparing broker recaps, paying brokers as well. But I think oil contracts has been the biggest win in terms of manual processes and automating those.