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
 
Senior Procurement Program Manager
     
     Bothell, Washington  -  PERM  -  Philips

Supply Chain Quality Engineer
     
     Mount Pleasant, Pennsylvania  -  PERM  -  Philips

Production Technician Associate (Th-Sat 6am-7pm) - Filling (Diag Tech)
     
     New Jersey - Branchburg  -  PERM  -  Roche

Transportation Coordinator
     
     Burbank  -  PERM  -  Michael Page

Strategic Sourcing Lead (Electrical Components)
     
     Des Plaines  -  PERM  -  Michael Page

Electrical Engineer - Procurement
     
     Bothell, Washington  -  PERM  -  Philips

Supply Chain Program Manager North America
     
     Cambridge, Massachusetts  -  PERM  -  Philips

Supply Chain Analyst - PCT Logistics
     
     Nashville, Tennessee  -  PERM  -  Philips

Production Technician (Th-Sat 6am-7pm) - Filling (Diag Tech)
     
     New Jersey - Branchburg  -  PERM  -  Roche

Import Coordinator
     
     Manhattan  -  PERM  -  Michael Page

Senior Strategic Sourcing Analyst
     
     Chicago  -  PERM  -  Michael Page

Supply Chain Planner - Downtown Chicago
     
     Chicago  -  PERM  -  Michael Page

Warehouse & Distribution Support, Philips Healthcare, (Home Based)
     
     Home Based  -  PERM  -  Philips

Mechanical Engineer - Procurement
     
     Bothell, Washington  -  PERM  -  Philips

Supply Chain Executive Assistant (Nashville, TN)
     
     Nashville, Tennessee  -  PERM  -  Philips

 

Supply chain E-learning



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



News & Trends
 

Last update 4 Jun 2021
Production growth accelerates amid stronger client demand, but supply chain disruption remains marked
   Source: Markit US Manufacturing PMI   -  IHS Markit
United States 


Fashion

Today’s omni-channel marketplace means competition is increasing, consumers are demanding more relevant products, inventory lifecycles are shorter and fulfillment is incredibly complex. Business conditions are constantly changing, which means you need the flexibility to adapt quickly and continu...

Supply chain transparency in modern food & beverage manufacturing: Building consumer trust

Achieving supply chain transparency across the food value chain is an increasingly complex process as many food and beverage companies are dependent on a multitude of suppliers with varying levels of supply chain soph...


Education
 
21
Jul
2021
Developing Excellence in Strategic Risk Management and Procurement
    
10
Aug
2021
Construction Law Contracting
    
 1 
Sep
2021
Resisting Price Increases and Implementing Cost Improvement Initiatives
    
21
Sep
2021
Fundamentals of Purchasing: The Building Blocks of World-Class Professionalism
    
 5 
Oct
2021
Negotiating for Excellence
    

Resources
 
Erema: Gaining a competitive edge through preferential exports

Erema, an Austrian manufacturer of recycling systems, uses AEB software to accelerate the proper classification of its components, manage supplier’s declarations, and ensure compliance in its exports. Erema ship...

Rethinking Supply in Food and Beverage

Global pressures on the food and beverage industry will only increase in coming years. More strategic supplier relationships will ensure you are ready for the changes.Amid rapidly transforming supply-and-demand pressures...