Skin ADV

Supply Chain Glossary

Glossary  >  C  >  Contract, Futures  


 

Contract, Futures


Source: Procurement Glossary
Author: Paul Rogers
Institute: CIPS - UK

Courtesy of


 

A contract traded on markets to exchange a specific amount of a commodity at an agreed future price and at an agreed future time.  The party agreeing to buy the commodity is said to have a long position, while the seller has a short position.  Forward contracts are similar to futures contracts in that both specify the exchange of goods for a specified price at a specified future date.  However, a forward contract is not traded on an exchange and the subject of a forward contract is not standardised.  Both approaches may be used in hedging, as these transactions allow speculators and purchasers to adopt an investment position intended to offset potential losses that may be incurred in the acquisition of the commodity.

For example, a chocolate manufacturer may enter into a contract to buy cocoa to make chocolate.  The contract is for 1000kg of cocoa to be delivered in three months time at a price of $1 per kg.  In three months time the price of cocoa may be more or less than $1 per kg, exposing the manufacturer to risk, so they may hedge the purchase by agreeing to sell 1000 kg of cocoa for $1 per kg in three months time.

If in three month’s time the spot price of cocoa is $2 per kg, the chocolate manufacturer will make a $1000 profit on their purchase of cocoa, as they can buy at $1 per kg rather than the spot price of $2 per kg.  However, they have to buy 1000kg of cocoa on the open market at $2 per kg to fulfil their obligation to sell 1000kg of cocoa at $1 per kg, resulting in a loss of $1000; exactly what they made on the purchase.

Similarly, if the spot price of cocoa is $0.50 per kg in three months time, the manufacturer will lose $500 on the purchase element of the hedge, but can buy cocoa at half the price it has agreed to sell at, making a profit of-$500.  See also Hedging.

 

 

 

 

 

 

 




Job Opportunities
 
Procurement Manager Bay Area, CA
     
     Bay Area, CA  -  PERM  -  Teldar Group

Procurement Director Bay Area, CA
     
     Bay Area, CA  -  PERM  -  Teldar Group

Sourcing Manager North Carolina
     
     North Carolina  -  PERM  -  Teldar Group

Senior Buyer San Francisco, CA
     
     San Francisco, CA  -  PERM  -  Teldar Group

Sourcing Manager Travel FL or TX
     
     FL or TX  -  PERM  -  Teldar Group

Supply Chain Manager Chicago, IL
     
     Chicago, IL  -  PERM  -  Teldar Group

Senior Sourcing Manager FL or TX
     
     FL or TX  -  PERM  -  Teldar Group

Sourcing Manager Fl or Tx
     
     Fl or Tx  -  PERM  -  Teldar Group

Facilities Procurement Manager San Mateo, CA
     
     San Mateo, CA  -  PERM  -  Teldar Group

IT Procurement Manager San Mateo, CA
     
     San Mateo, CA  -  PERM  -  Teldar Group

Senior Procurement Manager San Mateo, CA
     
     San Mateo, CA  -  PERM  -  Teldar Group

Sourcing Manager Nebraska
     
     Nebraska  -  PERM  -  Teldar Group

Senior Sourcing Analyst Metals North Carolina
     
     North Carolina  -  PERM  -  Teldar Group

Procurement Services Supervisor Sacramento, CA
     
     Sacramento, CA  -  PERM  -  Teldar Group

Global Category Leader Chicago, IL
     
     Chicago, IL  -  PERM  -  Teldar Group

 

Supply chain E-learning



Explore available supply chain e-learning modules by language and academy



News & Trends
 

Last update 10 Mar 2023
Softest decline in output for three months as supply- chain conditions improve
   Source: S&P Global US Manufacturing PMI   -  IHS Markit
United States 


Retail

The retail sector is always on the move. Whether this involves shopping centres, shops in inner city locations or at airports – trends change very quickly and the goods change just as rapidly too. To keep up with these developments, highly complex and process driven supply chains are needed. With our...


Education
 

Local & Regional Agenda
 


Resources
 
PPG INDUSTRIES, LTD.

Company Established in 1883, PPG Industries manufactures protective and decorative coatings, sealants, adhesives, metal pretreatment products, flat glass, fabricated glass, continuous-strand fiberglass products, and...

Digitalisation in Procurement and Supply CIPS and The University of Melbourne

The Chartered Institute of Procurement & Supply Australasia (CIPS) has been working with the University of Melbourne on a new paper about the digitilsation of supply chains, and how digital can increase efficiency...


International Agenda