Project Risk and Procurement Management: A Case Study Analysis

This report delves into the critical aspects of project risk and procurement management within the context of global organizations. It begins by highlighting the strategic importance of procurement, emphasizing its evolution from a mere component to a vital function driving business success. The report explores the significance of Supplier Relationship Management (SRM) and the importance of procurement in the modern business landscape. A comprehensive literature review examines project risk and procurement management, followed by a detailed case study of Toast Ale Ltd., a UK-based company focusing on sustainable practices by utilizing waste bread. The report addresses current issues in project risk and procurement, emphasizing the role of risk management in sustainable procurement and the importance of environmental awareness and customer demands. The report provides a comprehensive analysis of the subject, covering aspects such as supplier relationships, strategic procurement, and risk mitigation strategies.

Running head: PROJECT RISK AND PROCUREMENT MANAGEMENT
Project Risk and Procurement Management
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Abstract
Supplier Relationship Management (SRM) is needed for a company to establish
relationship between the supplier and the company. Strong Supplier Relationship Management
which are mainly concerned with the procurement professionals are used to develop supplier
relationship that is robust and negotiate the terms and conditions that are favorable. A strategic
importance in the international companies is given to the procurement management. The
businesses that are held in the modern world consider the procurement process as the strategic
role in their management system. The time procurement concept or the purchasing concepts that
are associated with the category and value chain are predefined. The landscape processes of the
entire business that are held in this modern era are changed totally and will also change in
coming 25 years. The business world is changing in its marketing demand, new issues arise
regarding the environmental factors and new upcoming attitudes to social also influence the
procurement function. This results in business globalization, alteration in business models and
technological progress. The procurement process is considered as the most strategic role in the
business processes because they are considered as the diverse factors that are present in the
procurement process. There is also a second role of procurement process that changes the entire
business world in respect to value management. This report deals with the importance of
procurement process in global organizations that operate with environment of complex markets.
It also illustrates some literature review about the procurement management and project risk.
There is a case study of a company named Toast Ale Ltd. in United Kingdom which deals with
wastage bread that is not used in the sandwich manufacturers or the bakeries. This report also
solves current issues of Project Risk and Procurement Management and also gives the
importance of Risk Management in Sustainable Procurement.

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Table of Contents
Abstract................................................................................................................................2
Importance of procurement in global organizations............................................................3
Literature Review of Project Risk and Procurement Management.....................................4
Case Study of Toast Ale Ltd. of UK....................................................................................8
Solve Current issues of Project Risk and Procurement Management.................................9
Importance of Risk Management in Sustainable Procurement..........................................11
References..........................................................................................................................13

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Importance of procurement in global organizations
Procurement before was considered as a component of international corporations. But the
time is changing now. The procurement organizations within the company play an important role
in making the business success globally in such a way that the purchasing managers of early
times cannot even imagine about that. Procurement has a strategic importance in international
companies and will have much significance in the coming years (Baily and Farmer 1947). The
modern business considers procurement to play a strategic role in their business. To build a
poliformic interest in the needs of internal and external business, the things that are required are
globalization, changing customer demands, extending product range and the economic pressure.
These can be done by revising the approach to the concept of value change and also accepts the
procurement power in regards with modern business organizations. In businesses, the process of
supply and purchase has now become integral process of value contributing. These effect the top
line as well as bottom line of the business and is related closely with the technological solutions
that deals with the risk and the data management issues and also reduce the cost of all the
processes that are carried out in an organization.
The procurement process mostly changed in 1990s and there was change in the economic
models that enter the business world which defined the importance of procurement in the
competitive market and their related processes and driving forces that are behind it. The concept
of time procurement or the purchasing that are allocated to the category and the value chain has
already being defined by a writer Michael Porter in his book (Jeynes 2002). The total landscape
of the business process has changed totally over these 25 years. The changing of market
demands, new upcoming attitudes to social and the environmental issues and the other factors

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that has significant influence on the function of procurement are responded to technological
progress, alterations in business models and business globalizations. Because of the diverse
factors that are present in the procurement process, it is considered as more strategic role as
procurement was used a few decades ago.
The role of procurement in perspective of price competiveness: The system of
procurement plays an important role in the bottom line of the business. The purchasing rate and
the sale ratio and the immense potential points to reduce the cost of purchasing are done in the
procurement process (Heldman 2015). The cost management is also done by the process of
procurement. All the processes that are associated with cost which involves usage of time and
having certain products are seen in the procurement process instead of only looking at the
upfront price.
The second role of procurement in changing the business environment is in the
perspective of value management. The business globalization, product range broadening, altering
the demands of the customer, alter the nature of market competition, economic pressure all
comes under procurement process and defines the role of procurement. The role of procurement
is changing and its focus is extended on international markets and also focuses on the
opportunities to the demand and supply management that are involved in the procurement skills
and all the professional knowledge to deal with complex issues that are needed to implement in
the process of procurement (Bryde, Broquetas and Volm 2013). New organizational types of
practices of procurement that are done in the internal organization are redistribution of all the
functions that come from inside the organization.

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Literature Review of Project Risk and Procurement Management
Project risk can be identified by their origin and nature, the likelihood of occurring and
their potential consequences. Management of risk deals with all these properties. The risk
management is not only to deal with the risk that can be assessed or the likelihood to their
occurrence, but also have to weigh against the benefits that come out of the procurement for all
the actors that are involved in the process (Liu, Meng and Fellows 2015). The benefit that comes
is not only absolute, but also determines in relation to all the targets and the context conditions of
the involved actors. If the risk is contextualized and is balanced against all the benefits that are
related with a particular procurement, then only the risk in the public procurement can be
assessed.
Today purchasing is considered as the most strategic importance of the organization that
has successful business in the market. All businesses do not see purchasing factor as the most
important factor in its specialized department. There are business processes who give all its
activity as more important in its businesses. An organization has particular team of specialist in
supply and purchasing sector (Flyvbjerg 2013). Purchasing role has increased tremendously over
the over last 50 years with dramatic upsurge that have association with the interest that takes
place in an organization. The reason for this change is very important and some of the reasons
for which purchasing has become important is summarized as follows:
Factors involved in organizations externally
Concept of leading edge: The organizations who employees the approach of leading edge
in managing the materials are putting integrative ideas into practice in the sector which deals

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with integrated role and strategic purchasing. Great interest is stimulated by the organization
using the leading edge approach.
Large suppliers: The supply market concentration has very deep effect in the recent years
(Kaiser, El Arbi and Ahlemann 2015). For instance, iron foundries that are located in UK have
decreased its number, pharmaceutical products that are produced in UK are mainly controlled by
very few large companies and there is only a few numbers of European companies that produces
chemical. This provides a supply and purchasing problem.
Environmental awareness is increased: To maintain a good business status in the market,
the business has also to look after the environmental awareness and had to go green. Recycling
its waste products is the capability of a good business processes (Williams 2016). The raw
materials that are wasted are renewed in the company. The company should have a concern with
the returnable packaging and also other concerns that are related to the environment. If the
awareness of the environment is not maintained in the company, it has implications on its supply
and purchasing sector which affects the business.
Competitor activity: To develop new ideas in an organization, the company has to look
after the level of performance competitors and also what other organizations achieves.
Benchmarking is a term that is often used in this process (Waller and Fawcett 2013).
Benchmarking does not deal with coping only. The activity of all the competitors of a company
should be looked after so that they can increase their own productivity.
Customer demands: The customer is considered as the most important factor in business
processes. One of the great marketing legends, Philip Kotler says that delighting all customers
who leads to fulfill the expectation of the customer is most important for a company (Krajewski,

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Ritzman and Malhotra 2013). Delighting all customers that are connected with the organization
is mostly noisy. It is always accepted to provide the best solution, product and service to the
customers to gain profit and maintain a good position in the market. Organizations are
considered as a customer driven and the driving factors impacts on purchasing.
Advancing technology: The technologies those are associated with the company are
advancing at a fast rate. Most of the companies use the advanced technology that helps in fast
production (Schoenherr and Speier‐Pero 2015). The complexity that arises from the technology
in a company has decreased the purchasing capability of a business.
Factors involved in organizations internally
The percentage of all services and goods that are purchased: More attention is given to all
the input activities that are involved in an organization (Wathne and Heide 2013). For instance,
retail and electronic organization, large automotive, percentage of materials that are bought out
and the expenditure of services that are related with sale income.
Structural changes: The logistic concepts and the management of material help to develop
the supply and purchasing function of a company. The amount of attention that is given to the
purchasing sector is rising vigorously.
Integrated systems: A system becomes more integrated in an organization and provision
of the information also increases. To find out the inefficiencies in a company also increases
within the organization (Amann et al. 2014). To develop an integrated system, input activities are
needed. The development stage that is carried out in an organization must have similarity with
the things that are needed to make an integrated system. The computer system which becomes
more advance have more possibility in reducing the routine work that is carried out by the staff.

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For making purchasing more effective, time can be spent. The large amount of data are disclosed
and organized by the integrated system in an organization.
Case Study of Toast Ale Ltd. of UK
Toast Ale Ltd. is a company in United Kingdom that deals with the wasted breads that
comes from the household food items. Chief toaster of Toast Ale Ltd. Rob Wilson describes the
supply chain of the company and the sustainable practices that it follows regarding the waste
bread in UK. In United States almost about 900,000 tones of bread are wasted in every year that
comes to around 24 million of slices each day. The amount of bread that is wasted every year can
save up to life of 26 million people from hunger (Williams 2016). About 22 percent of bread that
is produced in UK is wasted before it reaches the houses. Factories which make sandwiches
waste the heel and the first slice of the loaf which is counted as 17 percent of the loaf that is
used. The mission of Toast Ale Ltd. is to prove that alternative to all the waste is very delicious
and is pint- sized. They mainly reuse the artisan breads which are sold at the end of the day by
the bakeries and the crust ends that are thrown by manufacturers who produce sandwiches. The
special recipe of Toast Ale Ltd. is to make recipes that are combined with surplus fresh bread
long with hops, water, yeast and malted barley. This also serves the society to reduce the
environmental impact and also improves the social value of the food system.
The new brewery model of Toast Ale
The new brewing process that is incorporated by the Toast Ale Ltd. is to soak surplus
bread in water so that it releases all its sugar and then ferment the breads and make alcohol out of
it. Almost 40 percent of the malt is replaced by this method that is needed in brewing. This is an
eco-friendly method which involves using of waste product to make a new product. The business

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concept of Toast Ale Ltd. is to make great quality of beer, awareness of food waste and
sustainable production and give its donation that it makes as profit to the charity of food waste
known as Feedback.
Scaling up of the company
Toast first started with small artisanal bakeries. It is now working with some corporate
which includes commercial manufacturer of sandwich Adelie Foods (Lintukangas, Hallikas and
Kähkönen 2015). The Chief toaster Wilson explains that these types of businesses give the scale
of raw material which is free and is delivered to the manufacturing door. Toast wants to increase
its business more so that the company will be enable to make a conspicuous difference.
Sustainability of Toast Ale Ltd.
The consumer awareness and the heightened commercial that is currently used in solving
the issues of sustainability is making a good time for the ethical startups and also looks at the
matter of small businesses that has market test ideas before the company faces risk. The market
of beer is booming very much in United Kingdom and the more interesting thing is that it
produces new products from the food that is wasted.
Solve Current issues of Project Risk and Procurement Management
A procurement system that is trusted is mainly designed for accuracy, efficiency and
speed. Problems that come from human error in an organization result in negative effect in the
purchasing and procurement ability of a company. Common procurement methods that come in
project risk and common ways to change them are discussed as below.

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1. Accidental orders: If the business holder maintains a good relationship with the supplier,
then the mistake that is done can be admitted immediately and can be rectified
accordingly. This saves the business from loss in long term (Handfield, Primo and
Oliveira 2015). Ordering errors are very common in the transaction process and adequate
checks are required all through the supply chain. A protocol is adopted in organizations
that give a protection to the accidental issues that comes to the organization regarding the
purchasing sectors.
2. Inflexible Suppliers: Procurement decisions are related with the strategy of risk
management of a company. The less the cost of all the products, the more they make
profit and that is reflected in the market. Suppliers recognize that a company’s need must
be satisfied to maximize their performance. Still some of the suppliers do not offer
discounts and also charges for delivery.
3. Exceeding Budget: Procurement process that increases in a company are not mainly due
to spending. This happens mainly because of the coordination gap that is present in the
protocol of the procurement transaction (Winch and Leiringer 2016). The financial status
of the links in supply chain along with budgetary changes should be updated by
regulatory budgets and helps to rectify their problems that arise in the organization.
4. Damaged Goods: The procurement errors that mainly come in an organization are due to
taking emotional decisions that are based on supplier’s preference, phoning over with the
suppliers and impulsive buying especially in a company which is growing rapidly.
Cautionary steps that are involved in the procurement process are mainly ignored in a
business process (Hornstein 2015). A procurement process that is comprehensive and

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good gives thoughtful decision making and enhances prompt orders. Thought it is a time
taking process, it saves lot of work in long run process.
5. Rushed Purchases: There is a chance of the order that is delivered to be damaged and the
supplier may refuse the delivery or may refuse to accept the item. As a customer, the duty
of the customer is to record the shipment and firstly notify the supplier and courier
services immediately (Guo et al. 2015). Negotiations must be started regarding the person
who is responsible for the compensation that has occurred in the company. If the
company pays for the freight of the delivery, then during the transportation is the items
gets damaged, the supplier is not responsible for the damage. There are plenty of
suppliers that are available in the market. The company must always sure to report any
kind of defects in the products to the courier and supplier.
Most of the errors that arise in the procurement process are mainly due to human error.
The human errors can be mitigated easily. The company must be sure about to note the
procurement process take all the mistakes that are held in the company into account and
mutual understanding is done by the company to ensure the partnership related to the
supplier (Edquist et al. 2015). Safeguards are taken in a company to mitigate these types
of errors in the procurement ability of the company.
Importance of Risk Management in Sustainable Procurement
The managers who deals with the risk comes under tremendous pressure to manage the
wide range of strategies issues which comes mainly from the corporate performance, risk,
sustainability and governance (Zou, Kiviniemi and Jones 2017). These are too be maintained in
an organization including the supply chain which serves as significant area where a company
invests and also untapped savings in financial and emission form. Almost 80 percent of the

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controllable cost of a company are represented by supply chain and also have about 20 percent of
a saving potential. The supply chain also acts as a prime source to corporate with risk that needs
careful governance (Heldman 2015). The decisions of supply chain are considered as low level.
The strategic consequences that arise are not apparent, so the supply chain management is not
subjected to process of risk management. To maintain the sustainable procurement, risk
management is needed. The risk can be managed in sustainable procurement by following
methods:
Careful Design: The supply chain architecture should be developed carefully. The
architecture involves supply routes or shipping, location of warehouses and sources. If the design
is made proper, this will deliver cost, gives response to all the demands of customer and also will
effect on the performance (Hornstein 2015). All the points that are involved in the network of
supply chain are to be selected carefully and the relationships are to be developed with outmost
care and to ensure an architecture that is optimal and also is cost profile. The suppliers have to be
selected accordingly to their capability and to deliver the demands of all end customers.
Making processes cheap can be expensive: The supplier communities and providers of
supply chain service are responsible for purchasing, material control and procurement
departments (Silvius and Schipper 2015). These functions are regarded as strategic methods and
manage the cost inspite of best practices. More emphasis is lead on the cost savings which
expenses the response time, quality, logistical expediency and community behavior. This result
in headline procurement that is spends and reduces impaired cash flow and profitability. The key
measures that are used ti implement to reduce the risks that are connected with the supply chain
are often placed by risk managers. This ensures performance of supplier which is a superior to
all.

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Performing high at low risk: If the supply chain management is done in cheap, then there
is no space for improving the initiatives that are going wrong in the company and the company
will face disadvantage (Osei-Kyei, R. and Chan 2015). If correct steps regarding the processes
that are performed in the company are not done properly, then risk may arise. If all the processes
are followed correctly, the organizations will come up with best management of supply chain.

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References
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Baily, P.J. and Farmer, D., 1974. Purchasing principles and techniques. London: Institute of
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Bryde, D., Broquetas, M. and Volm, J.M., 2013. The project benefits of building information
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Edquist, C., Vonortas, N.S., Zabala-Iturriagagoitia, J.M. and Edler, J. eds., 2015. Public
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