AN EVALUATION OF THE SUPPLY CHAIN RISKS IN PROCURE-TO-PAY PRACTICES IN PRIVATE SECTOR

Table of content

1 Introduction chapter. 0

1.1 Background of the study. 1

1.2 Aim of Research. 3

1.3 Research objectives. 3

1.4 Main Research Question. 3

1.5 Synopsis of Area of Literature. 3

1.6 Synopsis of Methods of Research design. 4

1.7 Research Plan. 5

1.8 Summary of Chapters. 6

2 Literature review.. 7

2.1 Supply Chain. 7

2.1.1 Supply Chain Actors and Channel Relationships. 9

2.2 Supply Chain Management10

2.3 Procurement and the Supply Chain. 14

2.3.1 Procurement scope and strategy. 17

2.3.2 Procurement spend analysis for private sector organization. 22

2.3.3 Procurement and Procure-to-pay Process in stages. 26

2.3.4 The pre-contract stage. 28

2.3.5 The contract or Outsourcing stage. 33

2.4 Integration for procurement success and post contract stage. 34

2.5 Information Technology for Integrative Procurement41

2.6 Purchasing and logistical operation. 47

2.7 Supplier relationship and contract management reviews. 48

2.8 Risk and Procurement55

2.8.1 Risk Management in Procure-to-pay practice. 55

2.9 Evaluation of literature chapter59

3 Synopsis of the methods of research designs. 62

3.1 Research design. 62

3.2 Research approach. 62

3.3 Method choices. 64

3.4 Data collection process. 66

3.4.1 Sampling style. 67

3.4.2 Sampling frame. 68

3.5 Time horizon. 68

3.6 Data analysis process. 69

3.7 Study authentication. 70

3.7.1 Reliability. 71

3.7.2 Validity. 72

3.7.3 Limitations to reliability and validity. 72

4 Analysis for research data. 74

4.1 Case study overview.. 74

4.2 Diageo procurement structure. 74

4.2.1 Diageo procurement strategy. 78

4.2.2 Diageo’s core vendor selection conditions. 81

4.3 Diagio supply chain risks management approach. 83

4.4 Supply chain risk evaluation in diageo procure-to-pay practices. 84

4.4.1 Findings on risk assessment86

5 Evaluation, Conclusion and Recommendations. 96

5.1 Evaluation of thesis. 96

5.2 Conclusions and recommendations on the study. 97

5.2.1 Theoretical contribution. 97

5.2.2 Managerial contribution. 98

5.3 Further research opportunities. 98

List of references. 100

Appendix 1 Pre-interview induction format for risk evaluation………………………………………….123

List of tables

Table 1. 1 Research Calendar5

Table 2. 1 IT procurement spend assessment for TCO…………………………………..…………………………………25

Table 2. 2: Risks control measures. 58

Table 3. 1: Source of reasons for method choice………………………..……………………………………………………66

Table 4. 1 Diageo zones and responsibility(s) ………………………..………………………………………………………..74

Table 4. 2 Diageo Purchasing category.80

Table 4. 3 Business Integrity and Ethical Standards. 81

Table 4. 4 Human Rights and Labour Standards. 82

Table 4. 5 Health and Safety standards. 82

Table 4. 6 Environmental Impacts. 82

Table 4. 7 Sustainable Agricultural Supply Chain. 83

Table 4. 8 Financial risks results. 87

Table 4. 9 Strategic risks results. 88

Table 4. 10 Operational risks results. 90

Table 4. 11 Hazard risks results. 91

Table 4. 12 Procure-to-pay risk deductive index

List of figures

Figure 2. 1 An illustration of company’s supply chain.  Source.8

Figure 2. 2 Supply chain network structure and channel relationship. 10

Figure 2. 3 Information & product flows in supply chain management12

Figure 2. 4 Stages of a Detergent Supply Chain. 13

Figure 2. 5 Procurement aided: Dell’s direct delivery/installation for client.14

Figure 2. 6 The scope of procurement function. 18

Figure 2. 7 Estimated procurement spend for private sector organizations. 23

Figure 2. 8 Procure spend breakdown. 24

Figure 2. 9 Procurement and procure-to-pay process. 27

Figure 2. 10 Procure-to-pay generic high level map. 28

Figure 2. 11 Pre-procurement activities. 29

Figure 2. 12 Key sourcing related process.32

Figure 2. 13 The contract and outsourcing requirement web. 33

Figure 2. 14 Drivers of trusting relationship. 35

Figure 2. 15 Three Sources of Inter-organizational Competitive Advantage. 36

Figure 2. 16 The phases of negotiation-multiple meetings. 37

Figure 2. 17 Ranges of possibility in procurement negotiation.38

Figure 2. 18 Order processing without EDI. 42

Figure 2. 19 Order processing with EDI. 42

Figure 2. 20 Technology leveraging world class procurement performance. 43

Figure 2. 21 Buyer’s catalogue operation. 44

Figure 2. 22 Conceptual model of strategic procurement technology planning & integration. 46

Figure 2. 23 Portray of Procurement success and defects.47

Figure 2. 24 Models of supplier relationships. 49

Figure 2. 25 Suppliers relationship by levels and peculiarity. 50

Figure 2. 26 A comparison of before and after the supply re-engineering. 52

Figure 2. 27 Unlocking sourcing value.53

Figure 2. 28 Reference model56

Figure 2. 29 Risk Management Cycle. 57

Figure 2. 30 Model for assessing Procure-to-pay practice.61

Figure 3. 1 Research choices…………………………………………………………………64

Figure 3. 2 Figure 3.2: Sampling frame in relation to population and sample. 68

 Figure 4. 1 Diageo procurement organizational structure………...…………………………76

Figure 4. 2 Diageo’s Aims & Objectives for efficient delivery process. 77

Figure 4. 3 Self-billing procedure designed and adopted by Diageo. 80

Figure 4. 4 Diageo’s Partnership Standard areas. 81

Figure 4. 5 Best cases of procure-to-pay risk management approach. 94

Figure 4. 6 Model for extensive procurement uncertainty management key reference. 95