A day-to-day buying policy for commodities-A study of purchasing maize

The majority of the imported raw materials used by European industry have to be purchased in commodity markets where prices fluctuate over time. The overall purchasing decision contains several component stages. The work described in this paper concentrates on the final stages of this process, the tactical buying policy. A major difficulty lies in the definition of a proper measure of performance, so as to assess the merits of any proposed buying policy. The measures previously suggested by Kingsman and Taylor are discussed, and a new measure, thought to be more appropriate, is put forward. The paper describes a new heuristic buying policy, which is applied to the purchasing of maize. The policy uses Taylor’s price-trend forecasting model and leads to purchasing costs which are shown to be significantly lower than the average market prices and better than those obtained from Kingsman’s pricebreak policy.