International Commodities Index Article Example | Topics and Well Written Essays - 500 words

International Commodities Index - Article Example The supply chain of most products in initiated in the production or manufacturing stage. During this stage engineers and managers make purchase orders to obtain key raw materials needed to create the goods or services. In the power tool industry, two essential raw materials are metals and plastics. Plastics are a raw material which is considered a petroleum derivative. Crude oil and metals are categorized as commodities in the stock market. Their prices are very volatile and fluctuations in price occurred on a daily basis. Good indicators which analyst in the power tool industry must pay close attention to are commodity price indexes. For example, the Rogers International Commodity Index (RICI) aims to be an effective indicator of the price of raw material in the United States and around the world (Rogersrawmaterials, 2007). When the prices go down on these materials it is good idea to realize bulk purchases. Another strategy the can be utilized to lock the price of the commodity is to acquire future contracts. A future contract obligates a trader to sell an asset at an agreed upon price at some point in the future (Bodie & Kane & Marcus, 2002, p.982). Power pools are products which need energy in order to function. The energy industry is another key industry with has a great impact on the power tool industry. The designers of power tools must consider what type of platform will provide energy into the system. Two possible alternatives are battery and electricity power tools. Trends in the capacity and prices of batteries must be considered since the overall cost of the unit rises after the purchase of the batteries. If the power tools depends on electricity the executives of the companies could analyze trends in the electricity market by utilizing regression analyzes in which the monthly price of electricity over the last 10-20 years in particular country or city are inputted into the equation to determine price trends.