Forward Pricing & Risk Management
Risk Management is the formulation and execution of a pricing strategy relative to future business. At Sherwood Lumber, our Risk Management Team assesses our inventory risk along with forward risk. After looking at our proprietary data, market conditions, and fundamental ideas of the team, we come up with a strategy and execution plan. These ideas can also be used by our customers to increase their bottom line and add sales.
Is Forward Pricing right for you? Our customers are increasingly being asked to commit to jobs further and further out. With the ever volatile nature of commodity markets, combined with exponentially large projects, companies are exposed to market risk like never before. All companies can benefit from a means of laying off risk in order to provide consistent profitability and upside price protection. This is where Sherwood Lumber’s Risk Management Team comes in.
Checklist of Risk Exposure:
- How far out are you being asked to commit?
- What is the current market of said item?
- What is the fundamental supply/demand ratio of the species involved?
- Can I buy and hold, take it short, or lock in the price with Guaranteed Forward Pricing?
- What solution can Sherwood Lumber provide?
Guaranteed Forward Pricing Offers:
- Quote with confidence. Our program enables customers to confidently quote and sell lumber products with guaranteed fixed prices for out to 1-year in the future.
- Manage your market risk. Your price is guaranteed, and our program allows you to lock-in your profit. The price will be fixed and won’t change with market conditions.
- Customized job quotes. Each quote is custom tailored to your requirements. We will carefully review items, species, grades, volumes and delivery times for each transaction.
- Improve your cash flow. Shipments are scheduled for future delivery. You don’t pay for anything until your wood ships.
- Fresh mill stock. We source your wood immediately prior to shipment. Stock is always fresh, bright and clean.
- Normal transaction terms. All paperwork and billing procedures are exactly the same as normal daily transactions. Shipments are scheduled for predetermined future delivery, and payment is made when product ships.
- We sweat the details! Once your order is locked in, Sherwood will handle all the logistics and make sure the deliveries run smoothly.
Frequently Asked Questions:
- What items are available? Most commodity lumber items that are printed in third-party pricing publications can be applied to the Sherwood Lumber Guaranteed Forward Pricing Program.
- What is the minimum/maximum quantity required? Minimum quantity is 100,000 bdft. We routinely sell very large forward pricing block orders, so we can readily handle the substantial volumes that large jobs require.
- What if my delivery timetable changes? Sherwood Lumber will work to provide reasonable accommodations for changes to the original delivery timetable. Due to the nature of the hedge within these transactions, there is no hard and fast rules on how to handle each case. In many instances, we can push back delivery times with no problem. Other times, there may be additional carrying costs that will have to be considered before any changes can be made. There are some cases, due to the nature of their production origin, that are bound to ship as originally instructed. Clearly, issues arise and your Sherwood Lumber representative will work with you to provide a suitable solution to the demands of the program.
- Will the price be adjusted or order canceled in the case of extreme market moves? Forward Pricing deals are fixed in price and volume. They will not change with market conditions.