Global Supply Chain Management: Risks and Procurement Strategies

In this report we will discuss about project risk and procurement management and below are the summaries point:- This report covers global supply chain management, focusing on SRM, strategic procurement, supply chain risk management, and sustainable procurement. The importance of developing good long-term relationships with suppliers to obtain a competitive advantage is emphasized. The report also discusses a fictional UK food market business and how it applies these concepts in its global supply chain, including the risk of Brexit.

Project risk and procurement management
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Abstract
This report concerns with issues related to global supply chain management, with a special focus
on Supplier relation management (SRM), strategic procurement, supply chain risk management
and sustainable procurement from a theoretical perspective. It aims to investigate the supply
relationship management for its critical role in sustaining the operations of the supply chains
under the conditions of globalization of food supply chains. The research problem concerns with
the complexity of the SRM because each actor wants to maximize his profits and minimize cost
because of the high competition between organizations. This report explains the need for
organizations to develop their relationships with suppliers and consider them as business partners
by developing good long-term relationships with suppliers to enable companies to obtain a
competitive advantage. In order to provide a concrete analysis, the strategic procurement was
also investigated; it is considered among the key value chain processes because it significantly
impacts quality and price and it plays a cross-functional role between organizational
departments. Also, the supply chains risk management action plans are considered effective in
avoiding the identified risks or mitigating them and the structured risk management process
(RMP) was analyzed. In addition, sustainability issues are investigated due to the importance of
incorporating them into different activities and streams along the supply chain, starting from raw
materials the final product delivery to the customer. A factious small business operating in the
UK food market and extensively imports from Greece was selected to investigate how it applies
the mentioned concepts in its global supply chain. The main concepts discussed in the literature
review were applied to the case company to evaluate its position in the global supply chain in
terms of its SRM, global food supply chain risk management, utilization of strategic procurement

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and sustainable procurement. The risk of Brexit was considered and the required steps imposed
by the UK government are considered.

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Table of Contents
Introduction....................................................................................................................................4
First: Supply chain management.................................................................................................6
Second: Supplier relationship management (SRM)...................................................................6
Third: Strategic procurement......................................................................................................7
Fourth: Supply chain risk management......................................................................................8
4.1 Product quality risk management...........................................................................................9
4.2 Relevance of CSR failures in food supply chains................................................................10
Fifth: Sustainable procurement..................................................................................................10
5.1 Organizational inertia...........................................................................................................11
5.2 The role of procurement in sustainability............................................................................11
Sixth: Case study for a small UK business that extensively imports from Greece................11
6.1 Case company background..................................................................................................12
6.2 Supplier relationship management (SRM)...........................................................................12
6.3 Strategic procurement..........................................................................................................13
6.4 Food supply chain risk management....................................................................................14
6.5 Sustainable procurement......................................................................................................15
Conclusions...................................................................................................................................16
References.....................................................................................................................................18

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Introduction
Globalization of the economies and supply chains have facilitated the movement of goods.
Although, it resulted in increased expectations of consumers and intensified rivalry among
competitors. This led organizations to sell high-quality products with low prices and to transform
their supply chains into value chains through adopting strategic procurement policies (Thakur,
2017).
Organizations face risk in managing supply chains in the food market due to the greater distance
between producers and consumers. Food safety standards differ significantly between countries
on the public and private levels, the matter that increases the risk managing safety, quality and
ensuring no failure occurs in the food supply chain. Collaboration between supply chain parties
is very important, many approaches and models investigated the supply relationship management
for its critical role in sustaining the operations of the supply chains. The globalization of food
supply chains increases their complexity and makes the process of selecting suppliers based on
predefined safety criteria a critical issue (Shirani & Demichela, 2015).
Researchers assume that Supplier relation management (SRM) is a vital issue because suppliers
are considered a source of value for the organization and can increase the future revenues the
matter that makes them strategically important. Accordingly, supplier loyalty represents an
important measure. Also, procurement has strategic importance for its contribution to sustaining
the activities along the whole supply chain (Shah, et al., 2016).
The following section analyses the theoretical background concerning supply chain management,
supplier relationship management (SRM), strategic procurement, supply chain risk management
and sustainable procurement and their related concepts. Then a case of a small business in the

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UK, Foodland, the extensively Greece food importer was selected to investigate its SRM,
strategic procurement, risk management and sustainability through its global supply chain.

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First: Supply chain management
Supply chain management was developed by Michel Porter (1985), as cited in Kumar & Rajeev
(2016), it refers to the upstream and downstream activities and their linkages related with the
interconnection of organizations in order to produce value to the customer. Managing supply
chains involves managing material, money and information to produce products and services.
Procurement is the function of management meant for identifying, sourcing and accessing
external resources needed by the organization to achieve its strategic objectives. It is important to
select the best supplier, reduce cost and maintain quality. Contemporary organizations focus on
factors other than the price, like quality and avoiding material defects. That is why selecting
quality suppliers decreases the input costs and increases profitability (Thakur, 2017).
Second: Supplier relationship management (SRM)
Supplier relationship management in literature incorporates the relationship between the main
actors of the chain and represent an important aspect of supply chain management. Sanders
(2005), as cited in Onyango, et al. (2015), defines it to be the activities of coordinating,
collaborating and sharing information between the supply chain actors. Hence, these activities
are carried out to ensure collective planning, operating and executing business decisions to
ensure better performance and achieving sustainability. Effective communication and trust are
essential for the success of the SRM. Supplier engagement could take the form of a structured
partnership or formal alliance.
Lamming (1993), as cited in Tidy, et al. (2016), developed the customer-supplier relationship
approach. Partnership is considered the desired supplier approach in case the focal company
decided to create a long-term relationship with the supplier. Accordingly, Lamming drew his

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ideas from the agency theory, inter-organizational relations theory and the resource-based view
theory by considering them collaborative theories. SRM is considered a tool that helps in
delivery within the sustainability context, but it requires dealing with cautious when managing
activities related to the focal company external environment.
Third: Strategic procurement
The globalization of food production and markets has resulted in a gap between producers and
consumers due to the risk of foodborne illness. Globalization also led to organizations' increasing
demand for logistics and services, including transportation, storage and distribution where any
slight failure in food safety can cause a global problem. The SRM has changed and became more
complex because each actor wants to maximize his profits and minimize cost because of the high
competition between organizations. Considering the costs of safety risk increases costs
associated with supply disruption, potential recall and product liability. This matter explains the
need for organizations to develop their relationships with suppliers and consider them as
business partners. Developing good long-term relationships with suppliers is recommended to
enable companies to obtain a competitive advantage. These relationships refer to lean and Kaizen
philosophy (Shirani & Demichela, 2015).
The evolving market challenges led researchers to consider procurement among the key value
chain processes because it significantly impacts quality and price. It is considered the focal point
between the organization and suppliers as strategic partners, it plays a cross-functional role
between organizational departments. Better coordination between departments results in
effective procurement decisions and results. Long-term strategic procurement planning requires
the involvement of managers and specialist from the operations, purchasing, marketing, sales and
distribution departments (Hong, 2012).

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Fourth: Supply chain risk management
The increasing intensity of competition among companies exposes them to the risk of not
achieving the desired goals of their supply chains that might fail. Therefore, it is important that
organizations develop contingency plans when designing their supply chains. Risk refers to the
probability and frequency of defined hazard to occur. It is an action that adversely impacts the
supply chain operations and their desired performance. It is also essential that organizations
understand the interrelations between activities and define the potential factor of risk, their
severities, likelihood and consequences. Risk management action plans are considered effective
in avoiding the identified risks or mitigating them.
Hertz and Thomas (1983), as cited in Tummala & Schoenherr (2011), created the structured risk
management process (RMP). It consists of 5 phases, as follows:
 Risk identification: It involves a structured process of identifying the potential supply chain
risks associated with a certain problem.
 Risk measurement: It involves the determination of the supply chain risk consequence and
the magnitudes of impact. Risks are classified to four types of undesirable consequences into
trivial, small, medium and large.
 Risk assessment: It is concerned with the likelihood of each risk factor. beliefs and
judgment are used in assessing supply chain risk if objective information is unavailable.
 Risk evaluation: An evaluation technique should be used to decide the severity of its
consequences.
 Risk control and monitoring: Planning and mitigating risk are essential to control risk and
its hazards.

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 Risk planning: It is a process that begins with examining the costs required to carry out the
preventive actions in separate to manage the identified supply chain risks. These risks could
be reduced by buffering inventories, effective relationships with suppliers, information
technology and conducting what-if analyses. Plans are evaluated concerning the cost and the
best alternative is selected.
Considering risk in supply chain management is very important to avoid negative circumstances.
Risk weakens the supply chain and it could be sourced from different activities according to
Thakur (2017), as follows:
 Operational risk: It has a probability of affecting the organization internal production
ability.
 Demand risk: That stems from mis-forecast of demand.
 Business risk: That refers to the supplier’s managerial or financial stability.
 Environmental risk: It refers to the social, environmental political, technological, legal and
economic risk factors.
 Manufacturing and planning risk: They stem from disruption of operation, inappropriate
assessment and planning.
4.1 Product quality risk management
In the global supply chain, product quality risk (PQR) focuses on problems related with quality
within the multi‐tier supplier context instead of the focal company. Products are affected by
multi‐tier suppliers’ materials; where a minor risk can develop along the whole supply chain and
its network. The customers’ focus on a certain quality level determines quality according to its

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value and conformance to client needs. Suppliers’ focus on risk management, defines their risks
in the supply network (Chavez & Seow, 2012).
4.2 Relevance of CSR failures in food supply chains
Organizations aim to fulfill the stakeholders' requirements that is why they implement corporate
social responsibility (CSR) practices along with their supply chains. CSR enables companies to
incorporate their social and environmental concerns within their supply chain operations. There
are 8 areas of responsibilities in the food industry according to Maloni and Brown (2006), as
cited in Wiese & Toporowski (2013), they include environment, health and safety, animal
welfare, community, fair trade, biotechnology, human rights and labor and procurement.
Fifth: Sustainable procurement
It is important for organizations that manage supply chains to balance different aspects related to
procurement sustainability and to consider making trade-offs between them. There are
relationships between sustainable procurement and important factors that act as drivers to it,
including government pressures, management commitment. Sustainability issues are
incorporated into different activities and streams along the supply chain, starting from raw
materials the final product delivery to the customer (Walker, 2012; Walker & Brammer, 2012).
Kraljic (1983), as cited in De Mello, et al. (2017), proposed a basic procurement strategy model.
It was developed from the viewpoint of the focal organization and according to its way of
managing supply risk and profitability. The perspective incorporated within the model considers
suppliers to be competing vendors that play against each other to the benefit of the focal
company that purchases materials from them. Although, partnerships among suppliers could take
place when an opportunity that capitalizes on shared resources occur. This model does not aim to

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miss any short-term opportunity to secure its competitive advantage that is why it does not
consider the long term relationships with suppliers.
5.1 Organizational inertia
Organizational inertia refers to its inability to respond to changes in the external environment.
Environmental issues represent key aspects of sustainability, hence the procurement frameworks
for assessing supplier sustainability represented in ISO 14001ismportant. The organization
orientation towards procurement sustainability could stem from the consumer attention on
carbon footprints and the environment. Organizations largely focus on sustainability issues, like
recycling, remanufacturing and reverse logistics. Further internal sustainability drivers are
represented in internal organizational structures and change management (Meehan & Bryde,
2011).
5.2 The role of procurement in sustainability
The role of procurement in sustainability is major because it creates, develops, controls and
sustains the links between supply chain partners to avoid non-compulsory commitments and
manages mismatch between the sustainability policies and their application within organizations
(Meehan & Bryde, 2015).
Sixth: Case study for a small UK business that extensively imports from Greece
The case study enables to explore the real market events. The cases company reveals the real
practice of managing risk, managing SRM, strategic procurement, sustainability and managing
supply chain under the assumption of Brexit.

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6.1 Case company background
A small business in the UK – Foodland (is the given name since the real name has been hidden) ‐
was selected instead of a large company, to facilitate the investigation process of managing risk,
SRM, procurement and sustainability through the global supply chain.
Foodland operates its food supply chain under the European Qualifications Framework (EQF)
levels. Being an importer from Greece, the company faces the problem of the lack of
professionals specialized in supply chain in Greece. Also, the occupations of supply chain
management are not clearly defined. The company operates in the grocery market in the UK that
worth £177.5bn in March 2015. There is a high intensity rivalry between the big companies in
the UK market that resulted in a slowdown in the market growth to 1.7% in 2015 compared to
2.8% in 2014. The Greek agriculture sector growth rate recorded 0.8% and contributed with
3.5% in the GDP in 2015. Foodland imports 100 % of food materials and oil from Greece
because it is a market in a near country that reduces the time of importation and lowers the cost.
Also, it offers high quality European raw materials with low operating and logistic cost, the
matter that makes it a perfect candidate for food supplies (Thakur, 2017).
6.2 Supplier relationship management (SRM)
Foodland deals with 9 suppliers from Greece, it considers them to be strategic partners and
maintains a long-term relationship with them to guarantee their loyalty to the company. The

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company adopts strong supplier relationship management (SRM). These suppliers are loyal and
they cooperate with the company to minimize the risk associated with the quality of materials
and safety standards to match the UK industry standards. The company adopts the concept of
lean management that requires mutual trust in relationship development according to Bovea &
Pérez-Belis, (2012), as follows:
 Understand supplier management
 Realize the system of operations
 Collaboration with supplier rather than competition
 Supervise the suppliers work.
 Develop technical capabilities
 Share information selectively
 Cooperate with suppliers in activities that aim to improve supply chain processes.
 Maintain continues improvement and organizational learning
6.3 Strategic procurement
Three of the nine suppliers were replaced by the procurement manager due to the high risk
associated with quality standards five months ago. The new suppliers provided clear paths to
improve the quality of product management along the supply chain. Tracking the imported
material is a complex process due to the absense of well-established facilities system that leads
to increased costs. The UK consumption market needs a wider variety of high-quality food
products due to the increase in per capita income, socioeconomic shifts and demographics.
Foodland tries its best to meet the changing demand pattern. Managing the increasing complexity
supply chain of the company requires strategic procurement that can effectively monitor the

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performance of various activities, reduces cost and increases profitability (Kaditi, 2012).
Maintaining quality and safety standards of the food supply chain requires cooperation between
different parties within the supply chain and to continuously integrate relationships between the
stakeholders. Suppliers have more opportunities to satisfy the buyers' demand in terms of safety
and quality (Shirani & Demichela, 2015).
6.4 Food supply chain risk management
Foodland supply chain management consists of food plantation, cutting, importation, food
transportation to the company factory, processing, preservation, packaging and delivering the
final products to the market for sale and consumption (Patel & Deshpande, 2015). The company
follows the 5 phases of risk management according to Notarnicola, et al. (2017), as follows:
 Risk identification: There are two major risks represented in food quality management and
the expected Brexit.
 Risk measurement: The consequences of low food quality is severe and will result in a bad
reputation and revenues loss. The consequences of the Brexit are moderate and could result
in a decrease in the revenues.
 Risk assessment: The food quality risk is uncertain and less likely to happen, but the Brexit
if certain and high likely to happen so soon.
 Risk evaluation: The food quality risk impact is severe but the Brexit risk impact is low to
moderate.
 Risk control and monitoring: Planning and mitigating risk efforts are carried out by the
company management staff to be able to control the risk and its hazards.

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 Risk planning: Foodland adopts a risk plan to mitigate or eliminate the risk impact and
hazards. It has started with calculating the risk associated with each source of risk; the
materials quality and Brexit. The materials quality risk could be reduced by marinating well
established relationships with suppliers. The Brexit risk could be reduced by following the
required steps imposed by the UK government, according to the UK Government (2019), as
follows:
 Get a UK Economic Operator Registration and Identification (EORI) number to be able
to continue importing goods and applying for authorizations.
 Make a documented self-declaration for importation.
 To contact the organization that moves its goods to know the information they need in
order to make the declarations for its goods or Foodland can make it by itself.
 To consider the changes in regulations towards plants importation and their products that
will become a subject of UK control instead of the EU control. Imported plants and their
products will be treated as third-country imports.
 In case the UK left the EU without a deal, food labeling will change.
6.5 Sustainable procurement
Foodland is committed to the life-cycle assessment (LCA) that represents a product integrated
life-cycle-oriented policy. LCA enables the company to promote competitive and sustainable
growth. It follows the life-cycle assessment concept in the processes of designing and developing
new products. It aims to save the natural resources and energy on every activity involved in the
supply chain to minimize pollution and manage waste. Also, adopting lean management helps in
waste management thus creates a competitive advantage. The company also manages for green

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procurement that takes the environmental aspects into consideration when contracting with
suppliers from Greece (Bovea & Pérez-Belis, 2012).

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Conclusions
Managing supply chains involves managing material, money and information to produce
products and services. Procurement is the function of management meant for identifying,
sourcing and accessing external resources needed by the organization to achieve its strategic
objectives.
Supplier relationship management (SRM) incorporates the relationship between the supply chain
actors and represents an important factor that characterizes supply chain management through
the activities of coordinating, collaborating and sharing information between the supply chain
actors. Strategic procurement considers partnership with suppliers to create a long-term
relationship with the supplier. It requires the involvement of managers and specialist from the
operations, purchasing, marketing, sales and distribution departments for its importance.
Global supply chain management requires organizations to develop contingency plans when
designing their supply chains to avoid risk. Product quality risk in the global supply chain focuses
on problems of quality within the multi‐tier supplier context instead of the focal company.
Sustainability issues should be incorporated into different activities and streams along the supply
chain to manage supply chains and ensure balancing different aspects related to procurement
sustainability.
Foodland, small business selected to be the case company, operates its food supply chain under
the European Qualifications Framework (EQF) levels. It imports 100 % of food materials and oil
from Greece because it is a market in a near country that reduces the time of importation and
lowers the cost. Foodland tries its best to meet the changing demand pattern. Managing the
increasing complexity supply chain of the company requires strategic procurement that can

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effectively monitor the performance of various activities, reduces cost and increases profitability.
Foodland is committed to the life-cycle assessment (LCA) that represents a product integrated
life-cycle-oriented policy. The company faces the risk of low food quality that might occur and
result in a bad reputation and revenues loss. The consequences of the Brexit are moderate and
could result in a decrease in the revenues.

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