HC Insights - Data science: at the heart of operational and commercial transformation
Category: Insights

Data science: at the heart of operational and commercial transformation

Ever-evolving data science and solutions are not just about increasing margins anymore. The digitization of commodities sector offers opportunities to improve operations, business models, decision-making and constantly sharpen companies’ competitive edge across the value chain.

The commodity sector has undoubtedly benefited from a general surge in data in recent years, not to mention the development of analytical tools to process this wealth of information. As more players can access troves of new information, traditional ways of gaining an edge such as informal communication networks are no longer as valuable. Data has made the industry more transparent, and technology has made it more fast-paced by increasing automation.

An article by HC Insider outlined the impact of data and data science on the commodities sector in recent years. “Where traditionally companies had the competitive edge through their relationships, now the focus has been shifted to a company’s ability to collect, store, analyse, and monetise data.”

Although the article focuses on agricultural commodities, many of its points apply equally to other parts of the commodities’ complex. Indeed, business intelligence services offering market analysis, price assessments and consultancy services are only becoming more common in markets from metals and mining to oil and gas.

This is particularly the case for commodity trading, where data can be used to sharpen price predictions. It can also serve physical market needs, however, through predictive maintenance for refineries, pipelines, or wind turbines, for example.

The digital transformation seen across the commodities industry means firms in this space now require “an entirely new operational model”, according to a recent report by data provider Refinitiv and consultancy Boston Consulting Group (BCG) - The Digitization of Commodities: How to stay competitive in a new market era. This often involves moving through BCG’s four stages of digitization:

  •  Invest in electronic platforms and straight-through processing to cut direct costs;
  • Use automation based on parametric algorithms to optimize processes and market entry;
  • Leverage data-driven assistance to support decision-making and execution;
  • Achieve full automation of the value chain.

All of these stages will require firms to invest, not only in the technology, but in people that know how to wield such tools now and as they develop over the longer term.

Technologists are set to see their roles in the commodity trading sector change as their algorithms are increasingly used to execute trades and add revenue to the trading desk. Merchant firms are already adapting their recruitment strategies in line with this development, as they seek to hire commercially facing developers that could one day even enjoy a risk-taking remit.

The growth of analytics also plays into this industry evolution, given the growing number of solutions that can enhance and speed up decision-making. When combined with automation, such developments are likely to change how commodity traders operate by freeing them up for more high-value work. Potential recruits with data gathering, analytics or programming skills will continue to be in high demand going forward - even more so if they also have commodity market knowledge and experience.

Contact hcinsider@hcgroup.global for our Q3 2021 Market Review.

Our quarterly market reviews provide you with the latest global people moves, an overview of the activity affecting the commodity markets, and our predictions for talent demand.