What comes to your mind when you think of 'agile'? It’s likely tied to the tech industry, where agile has become essential in software development and project management. It ensures faster task execution, clearer responsibilities, and more efficient teams.
However, the benefits of agile go beyond software development. Agile methods, paired with the right software tools, can significantly improve the slow processes in the commodities industry. Many businesses in the sector have already adopted agile principles and integrated them into their operations.
Embracing digital transformation in the commodities industry means investing in software development. This article explores how agile and digital transformation drive efficiency, including in-house vs outsourcing software development.
Key Takeaways
- Digital transformation is essential in commodities. Agile delivery and modern software are now baseline requirements.
- Outsourcing speeds delivery, expands access to expertise, and reduces cost compared to building in-house teams.
- In-house development offers control, but often trades speed and flexibility for higher cost.
- AI, cloud, and automation drive faster decisions, lower costs, and more efficient trading operations.
- The right development model depends on scope, urgency, internal capacity, and scale.
Embracing Digital Transformation In The Commodities Industry
By doing so, you’ll streamline business processes, easing your team's workload and allowing them to focus on more important tasks. You’ll also adopt agile methodology, helping to accelerate task execution and ideation.
But how do you start? What should be digitized in your organization? In industries such as commodities, especially mining, which are traditionally less tech-friendly, implementing new software tools can be challenging.
- Address existing gaps: Identify areas where digital tools can fill operational gaps and enhance productivity.
- Ensure scalability: Consider solutions that can grow with your business as it expands and adopts more advanced tools.
Business owners in this industry tend to cling to outdated methods and are often skeptical of new technologies, making the shift to digital more challenging than it should be.
It is also true that many major businesses in the commodities industry have already adopted digital transformation and are successfully reaping the benefits of partnering with an outsourcing company.
This leads to a discussion of in-house vs. outsourced software development as a key consideration for these businesses.
Why Invest In Software Development For Your Commodities Company?
The commodities sector is multilayered and increasingly broad, spanning agriculture, forest products, precious stones, metals, mining, energy products, and chemicals.
First, let’s have a look at some statistics about the commodities industry, with a focus on the mining sector, to see the bigger picture:
Source:ResearchGate
- The global mining industry is a major supplier of raw materials to various sectors. The revenue of the top 40 global mining companies totaled approximately $925 billion as of 2021.
- Iron ore, coal, potash, and copper - these are the most exploited commodities around the world.
- As of 2021, the total operating costs of the top mining companies worldwide hit $633 billion - a huge increase from $482 billion, the amount spent in 2020. Expenses are forecast to continue growing in the coming years.
- In 2022, iron ore was one of the most produced mineral commodities globally. Its production amounted to nearly 2.8 billion metric tons.
- Mining exploration budgets across countries continue to increase year over year. In 2021, Canada’s mining exploration budget increased by approximately $801 million, as compared to 2020. Australia came second with a budget increase of nearly $566.1 million.
- The top producers in mining are China, Australia, the USA, Russia, Canada, and South Africa.
- Mining companies worldwide are some of the largest employers. Over 3.7 million people work in the mining sector, of whom 1.5 million are from developed countries, and 2.2 million are from developing countries.
It goes without saying that the commodities industry does not start and end with the mining sector. However, the above statistics demonstrate the scale of this field and its potential impact on the global economy.
In a competitive market with only a few large players, it’s important to invest in modern solutions to stand out amid the many new entrants. This brings us back to the ongoing debate of in-house vs. outsourcing software development, where digital tools are at the heart of driving growth.
What Are The Benefits Of Digitalization For The Commodities Industry?
Digital transformation and app modernization are reshaping commodity trading, offering valuable solutions. However, commodity traders remain slow to adopt these changes.
When deciding how to implement digital transformation, the choice between in-house vs outsourcing software development becomes crucial. In-house development can be time-consuming and costly, whereas outsourcing offers flexibility, access to global expertise, and cost-effective solutions that can accelerate your transition.
Why Digital Transformation Is Crucial For Commodities Companies
Nonetheless, as they say, if you don’t risk anything, you risk everything. This is especially true for our times. If you do not invest in technological innovation, your business will eventually fall behind in the competitive market.
Now, let’s have a closer look at all the benefits that digitalization brings for the commodities industry:
1. Increased Value And Improved Business Processes
Software technologies help connect the value chain, improving communication, collaboration, and decision-making.
2. Access To Real-Time Data
As they say, 'data is the new oil,' and commodity traders can benefit most from this valuable resource. Companies in the commodities sector now access real-time market feeds, weather reports, product movements, shipping schedules, inventory levels, and more.
IoT sensors can provide real-time data on agriculture products, metals, and oil from mine to manufacturer. With the right CTRM (commodity trading risk management) software, you can analyze this data to make smarter trading decisions.
3. AI And Big Data Analysis
AI tools provide deeper insights by quickly analyzing data from commodity management. What would typically take days or weeks can now be done in minutes.
For example, AI algorithms can assess ore fragmentation, inspect underground sites, and analyze open pit mines using 3D maps, aerial photos, and satellite imagery. By combining drill data, sample analysis, and survey reports, AI tools can propose solutions to increase ore deposits.
AI programs also help improve targeting across grade zones, reduce exploratory drilling, and resume work in defunct mines. This saves time, boosts safety, and increases productivity. Another example is self-driving haul trucks, which can operate in hazardous environments, and machine learning algorithms that predict asset failure to prevent downtime.
4. The Invaluable Input Of Mobile
Mobile phones can also be helpful in commodity trading. They help you be on top of things constantly and take immediate action when needed. You can log in to your CTRM from your phone anytime, anywhere, and check on work progress, market conditions, and more.
5. Enhanced Flexibility Thanks To Cloud Computing
A key part of digital transformation is moving to the cloud. This change enables commodity companies to access data and systems anytime, including via mobile devices, and provides scalability for future growth.
For example, you can start with a basic CTRM solution and later add capacity and features as your company grows. Cloud systems let you pay for the basic plan initially and expand with reporting and risk management apps without disrupting existing processes.
6. Bureaucracy Reduction And Optimized Contract Management
Automation tools can reduce bureaucracy and improve document flow, especially in commodities trading, which involves heavy paperwork. The contract process is often delayed by multiple employees handling revisions via email, which can take over a month and increase the risk of financial loss.
By automating, contract information is instantly shared via a mobile app, with changes visible to all. This accelerates drafting, finalization, and signing within a day, reducing manual work and email exchanges.
7. Better Transparency And Security
When digitized, business processes and daily operations become simpler and easier to access, ensuring greater transparency for everyone in the company. Other than that, since a building block of a successful commodity business is the number of successful collaborations with its partners, digital tools can help ensure you are working with the right people.
Digital platforms can help you assess your future partners’ solvency to ensure reliability, for example, by reviewing their unified credit score.
8. More Opportunities For Small And Mid-Size Commodity Traders
As technology plays a bigger role in commodity trading, the industry is no longer exclusive to large companies. Small and mid-sized firms can now compete as well, provided they know how to leverage the data generated by their software tools.
Leigh Johnson, Global Head of Commodities at Refinitiv, says, 'It’s not just about speeding up paper-based processes or reducing human error. It’s about ensuring companies have access to up-to-date digital information to improve operations and support trading decisions.
9. Minimized Environmental Impact
Manufacturing facilities can implement software solutions to reduce their environmental impact, including raw materials inventory management, priority-based production planning, and auto-booking engines.
As you can see, digital transformation is now just a buzzword. It offers multiple benefits that can help your commodities business in ways you may not have considered.
Outsourcing Software: A Shortcut To Digital Integration In Commodities
To implement digital tools in commodity trading, you'll need extra expertise. Many firms lack dedicated tech teams or have specialists who are overwhelmed, making external guidance essential for digitization.
You have two options here:
- In-House Software Development: This means you hire your in-house tech team to handle your software needs.
- Outsourcing Software Development: You partner with an experienced software development company, either onshore, nearshore, or offshore, and let them take care of your software needs.
The choice may seem harsh, but by weighing the benefits and drawbacks, it’s clear. There’s no right or wrong; choose what best fits your business needs and project specifications.
In many cases, companies find that the in-house vs. outsourcing software development decision turns on resource availability, timeline, and specific project goals.
What Are The Advantages Of Software Development Outsourcing?
Outsourcing your software development needs provides several key advantages:
- Cost-effectiveness: Outsourcing allows you to hire top talent at affordable rates, reducing costs for onboarding, benefits, insurance, training, and office space. You pay an hourly rate for each tech specialist, and once the project is complete, there are no ongoing costs, unlike an in-house team.
- Short-Term Commitments: Remote teams are flexible, scaling up or down as project needs change. You can work with them only when necessary, avoiding long-term salary commitments.
- Low Employee Retention Rates: Finding the right specialists is one thing; retaining them is another. Without raises or incentives, you risk losing them to companies offering more. According to the 2021 Bureau of Labor Statistics report, the turnover rate for software engineers is 57.3%, with 25% being voluntary. This makes the technology industry a leader in turnover rates.
- Recruiting Time: Hiring a new developer or tech team takes significant time and resources. On average, IT positions take about 42 days to fill; this can be longer due to notice periods of 1 to 3 months. This delay can affect your software project timelines, so it’s essential to consider your deadlines and ensure your business can accommodate such gaps.
- Reduced Scaling Flexibility: Scaling is easier with outsourcing than with in-house teams. Firing your tech team after a project harms your reputation, while keeping them costs a fortune.
Partnering with the right software development team allows you to focus on growing your business, while experts handle the technical challenges that drive your success.
Outsourcing VS. In-House Development: Which Is More Secure?
Who, if not commodity traders, knows the crucial importance of security for any business? When implementing software solutions in your commodities firm, security should come first.
We cannot say that outsourcing is more secure than in-house development or vice versa. Both come with risks. The point is to ensure that any new team member you hire is security-literate. When considering in-house vs. outsourcing software development, any outsourcing partner must internationally recognized security measures in place. Do a background check, ask about their security standards, read reviews, and research as much as you can. An experienced and reliable software partner will care about the security of your data as much as you do.
Making The Final Decision
Deciding between outsourcing and in-house software development depends on various factors, from project requirements to available resources.
Here’s a quick guide to help you make the right choice for your business.
Unlocking Business Potential With The Right Software Approach
Choosing between in-house development vs. outsourcing is a critical decision that impacts the success and efficiency of your digital transformation. By evaluating your project needs, budget, and available resources, you can determine the best path forward for your business. Whether you opt for outsourcing to access global talent and flexibility or prefer in-house development for greater control and team cohesion, both approaches offer unique advantages.
If you choose to outsource, VOLO is here to guide you through the digital transformation process. With extensive experience in building software for businesses across various industries, including commodities, we offer tailored solutions that align with your goals. From custom software development to modernizing legacy systems and transitioning to the cloud, our team of experts can provide the support you need to scale and innovate.
At VOLO, we work with agile methodology, ensuring flexibility and collaboration throughout the project. Our business analysts, tech leads, and developers communicate seamlessly in English, and we’re committed to delivering high-quality, results-driven solutions that meet your needs.
If you’re ready to digitize and streamline operations, let’s talk about how to get more from your software.
