Supply Chain Risk Management with a Focus on Formalization Concepts for Strategic Procurement Processes

With the current growth in technology, the world has become a global home rather than a global village, and in this race of globalization, all the firms have the common goals of saving cost, grabbing more customers, and leading the business market. The digital revolution is already knocking at our doors, the world is going towards digitization of processes; concepts like Industry 4.0, IoT, Blockchain Technology and Procurement 4.0 are floating around. Companies cannot survive in the industry all alone and rather, collaboration and cooperation are the need of time, because of which the supply chain are becoming more complex than ever which makes the supply chain more prone to risks.

Supply chains of today are more vulnerable than in the past due to the growing globalization, many companies manufacture and source products internationally, which leads to different risks in the supply chain, these risks need to be identified and mitigated properly. Blockchain technology can be used as a risk mitigation tool by integrating its basic features, like data storage and retrieval in supply chain because of which the automation of processes would mitigate risks and improve performance of supply chain. With the implementation of Blockchain Technology in a supply chain, the overall performance of supply chain can be improved in terms of visibility, traceability, demand forecasting, access of information etc., which will reduce the risks associated.

The digital revolution currently is affecting every sector of the business, prominently hitting the supply chain industry and as procurement is a vital part of supply chain, automatically, this impact will be shifted to the procurement industry as well.

If supply chain is considered as the vein of any organization, procurement is then the injection point of the right material to flow in the vein to keep it running. Procurement is an important part of the supply chain and the value it could bring to any supply chain should not be under-estimated; it involves collaboration between many parties due to which the impact of digital revolution is also hitting the procurement industry and is making the procurement processes prone to risks.

Procurement is divided into 3 levels i.e., Strategic Procurement, Tactical Procurement and Operational Procurement.

Strategic Procurement is the most important procurement type and is also known as P2S (Plan to Strategy), it refers to long term organization-wide plans to ensure timely supply of goods and services which are crucial and critical for the business. Moreover, it also focuses on organizational spends, consolidation of suppliers, identifying critical and strategic suppliers, and maintaining long term relationships with strategic suppliers.

Tactical Procurement also known as S2C (Source to Contract) refers to the short-term plans up to 1 year and transactional activities to keep the business running smoothly which starts from the requirement identification and ends with a complete contract with suppliers.

Operational Procurement also known as P2P (Procure to Pay) or R2P (Requisition to Pay) refers to the process of requisitioning, purchasing, receiving, and paying for the good or services needed; this process is the actual purchasing process of the procurement.

The objective of this research is to show, analyse and investigate how the supply chain risks can be managed effectively, what are risks associated with the procurement processes and how automation of all the procurement processes will improve the overall performance of procurement. Risk management is all about identifying, analysing, evaluating, and mitigating possible risks, which could affect the business processes.

Emerging literature, case studies, blogs, expert opinions, market knowledge, practical business experiences, supplier evaluation techniques like weighted point method and simulation concepts like monte carlo simulation are used to fulfil this task. This research can contribute to explore further research on automation of all procurement processes e.g., SRM, spend management, claim management etc. and as well as on the usage of Blockchain Technology in the FMCG supply chain. In a nutshell the proposed concepts in this research could be used as a base to create a one-stop-solution that can address all the problems and fulfil all the requirements of an organization.



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