Page 323 - Aida Hovsepian Onboarding

a. This starting value is then used to calculate an ending value of the
respective PPI item, using the rate of performance as previously
calculated.
b. If the PPI category item increased by 1.94%, then the starting price per
case of $2.10 is increased by 1.94% to result in an ending case value of
$2.14.
5. The indexed method of performance calculation of the PPI is then put through
the same case volume as the market basket mix of the MPPI, yielding the
comparison of only price change. The difference in market basket item
compared to PPI item results in the net performance differential.
6. The market basket is treated as a unique index each year
a. Items are added and deleted each year
b. Mix shifts occur
7. Data gaps in PPI are treated as the average of the most recent periods
a. For some items PPI is not consistently reported (Almonds)
b. Zeros cannot be a price result and must be deleted, otherwise it
invalidates the average price
8. PPI data can be revised for up to four months after initial release and
consequently must be updated every month up for the prior four respective
months.
9. The most closely related individual PPI measure is assigned to each commodity.
a. The BLS thoroughly followed the North American Industry Classification
System (NAICS) and truly reports on every item accounted for in US
manufacturing. Items are often lumped together in categories, resulting in
a dilution of the specific category performance.
b. Classification of the MPPI items must following the same classification
method as used by the NAICS. This will result in the MPPI correlation to
the PPI that includes the specific market basket item.
c. The correlation may not seem accurate, but the respective PPI will contain
and report on all the transactions for the market basket item, even though
it is pooled with other related items in the performance reporting.
d. This leaves the correlation slightly less than perfect because of dilution.

MPPI Process

Requirements:
1. PPI Master Database
2. Apple Index
3. IHOP Index

MPPI Process –Director, Commodity Risk Management Page 4