BSS054-6 Risk and Procurement Management Assignment Sample 2024
Introduction
In the modern era, it is the duty of every organization to establish an effective procurement management or else the organization may not be able to optimize the overall spending of the organization. Procurement management may be considered as a strategic approach by an organization that helps the company in selecting effective vendors, raw material suppliers within a preferred budget of the company.
In addition to that, one of the main advantages of using procurement management is that it plays a crucial role in utilizing the total spending of the company. Procurement Management may be treated as an essential part of the Supply Chain Management (SCM) of an organization which has a massive impact on the performance and productivity of a company (Ahmadi et al., 2018). An effective procurement management company is extremely impactful in reducing the risk level in the SCM of the organization. In this report, the procurement process of Tata Motors will be discussed in detail.
Q1 Analyzing and identifying of procurement process of Tata Motors
Tata Motors is one of the biggest and most famous automobile manufacturing companies in the world and the company is extremely focused on establishing effective procurement management for the growth and success of the company. The management of Tata Motors also prefers to reduce the risk level and complexity in the production unit and for that reason, the company has designed a unique sourcing strategy and procurement management (Tata Motors Limited. 2022).
In addition to that, the procurement management of Tata Motors gnarly includes three stages such as sourcing, purchasing and payment stage and one of the main advantages of using this process is that it helps the company in identifying appropriate vendors, suppliers, and payment methods.
Sourcing stage
The sourcing stage is one of the main and essential steps of the procurement management of Tata Motors and this stage also includes some sub steps which are followed by the company in order to maintain the entire process of the company effectively. In this stage, the management of Tata Motors has identified the specific products which will be produced and in that case the management of the company has manufactured a variety of cars according to the demand of customers.
It has been observed that the purchasing decisions of customers always create a positive impact on the procured product and services and for that the reason for the company needs to be identified at this stage. After the identification of products Tata Motors also submit a purchase request with the help of electric or written documents.
The purchase requisition is extremely essential for the company as it will help the company to understand the budgets which will be needed to procure the product successfully. The financial management of Tata Motors is closely associated with these activities which help the company in assigning proper funds which will be used for business purposes (Gautami and Kalyan, 2018).
In the modern era, most of the companies in the world use e-procurement which implements electronic methods in Purchase requisition. After this stage, Tata Motors selects the vendors which will help the company in managing the procurement process in a fruitful manner. However, if the company is not able to select a proper vendor then it may create a disruption in the procurement management of the company.
It is extremely essential for the company to set a proper vendor and in this case, the company needs to consider various elements before selecting the vendor such as cost and quality of the products. On a specific note, the management of Tata Motors also uses a Request for Quote (RFQ) which helps the vendors in identifying the requirements of the company.
After sending the RFQ to different vendors it is the duty of the company to compare the bid and select the appropriate vendor who will be able to fulfil the requirement of the company. In the modern era, most of the organizations of the world have implemented Multi-Attribute Decision Making (MADM) which plays an essential role in selecting and shortlisting appropriate suppliers for the company (Ghorabaee et al., 2017).
Purchasing stage
Purchasing stage is also essential in order to fulfil the procurement aims and objectives of the organization and it has been observed that this stage is extremely crucial for the company in order to deliver high quality cars to the customers of the company. The stage includes many activities such as negotiating with vendors, providing orders and inspecting the quality of goods after the delivery of orders.
Negotiation may be considered as one of the most essential activities which need to be managed and handled carefully or else the delivery of raw material may be disrupted. Sometimes the price of raw materials is extremely high and for that reason, Tata Motors needs to apply this negotiation policy in order to reduce the price of the raw materials.
Additionally, if the price of the products is extremely high then production costs may be increased which ultimately increase the price of the products. One of the main advantages of using a negotiation policy is to mitigate the extra price and purchase the quality raw material at a low price. After negotiating with suppliers when both parties are satisfied then Tata Motors creates a purchase order.
The purchase orders need to be extremely specified or else the suppliers will not be able to understand the amount of material that needs to be delivered to Tata Motors. Sometimes, it has been observed that delivery items may have some defect and for that reason, Tata motors also apply the inspection method in order to check the quality of raw materials.
Payment stage
The payment stage is an essential stage of the procurement management while if the company will make any kind of mistake in this stage then the overall operation of Tata Motors may be disrupted. In this stage, the company needs to do several matching and checking which is essential in order to reduce the risk level of the payment stage. The management of Tata Motors has evolved a three-way matching system by checking the purchasing order carefully, matching the list of orders and checking the invoice before making a payment.
Tata Motors is also focused in establishing an e-procurement system that will help the company in reducing the issues and complexity in the payment process. After the payment and other processes, the company keeps the records about all the operations which make the procurement process transparent, clear and accurate.
There are many ways to manage and handle the risk in the procurement process of Tata Motors such as if the company will be able to improve the effectiveness of the SCM of the organization the risk level may be reduced. In addition to that, there may be an occurrence of many kinds of risk such as operational risk, legal risk, financial risk, constructing risk and many more while without proper planning it is extremely difficult to control procure management (Zubaidi, 2019).
On the other hand, the manager of Tata motors is required to take other useful steps such as developing an effective vendor sourcing strategy, implementing automation tools in the SCM and many more. The procurement process of the company is extremely suitable as it may be able to reduce the risk level in procurement which may help Tata Motors to achieve the organizational goals and objectives.
The company has established an e-procurement model which is immensely useful in mitigating the manpower, time and cost for the procurement management of the company (Khuan, 2018).
Q2. Comparing and contrasting different types of contractors and forms of collaboration in Tata Motors
Automobile companies need to settle with different types of contractors while without the proper engagement of contractors it is extremely difficult for the company to manage the entire procurement process. In this company, the contractors mainly conducted many kinds of activities in order to make the entire project successful.
Work package contractors are the important contractors of Tata Motors which maintain the overall procurement process such as sourcing of raw material, selection of suppliers, payment method and many more. Several stages are included in the making of cars and vehicles while if the company will be able to manage the work packages contractors in an effective way then every step of procurement will be completed before the preferred deadline.
It is the duty of the company to manage and handle the cost performance while it is extremely difficult to manage the cost performance in procurement management. It needs to be mentioned that in many companies the contractors generally implemented a labour per hour unit approach which is more impactful than rupees per unit work approach which is helpful for the contractors in terms of generating more profit (Yismalet, A.G. and Alemu, 2018).
Integrated Supply Team may be considered as one of the main contractors of Tata Motors as automobile manufacturing totally depends on the availability of raw materials. In this industry, Tata Motors has acquired a big place and it is ruling the automotive industry of India even though if the company will not be able to maintain an Integrated Supply Team then the procurement process may face major difficulties.
On a specific note, there is a requirement of steel, plastics, semiconductors, aluminium, glass and rubber to make a supreme quality car. The management of Tata Motors selects and shortlist specific suppliers and also have an agreement with these suppliers which plays a crucial role in providing large amounts of raw material to the company.
It is one of the biggest responsibilities of modern companies to digitize the SCM in a fruitful manner which is extremely essential in increasing the competitiveness of the company in the existing sector (Bienhaus and Haddud, 2018). Tata Motors also implemented innovative technologies in the SCM and procurement management which helps the company in designing an Integrated Supply Team that reduces the risk factors from the supply chain.
It is the duty of every company in the modern era to focus on team collaboration while if Tata Motors will be able to collaborate with the entire team then it may affect the production and performance of the company. On the other hand, Tata Motors is extremely focused on to increases team collaboration between the contractors and the company which may help the company in operating the entire procurement process in a more professional manner.
Team work collaboration is extremely essential in managing the quality of work and for that reason Tata motors always focus on improving team collaboration which is useful for the company in producing supreme quality cars. Poor collaboration between contractors also has a negative impact on the brand image of the company as it may harm the quality of cars which may not be able to attract a huge customer base.
Q3 Critical evaluation of contract breaches regarding the case study of Tata Motors
Breach of contracts or contract breaches is a legal issue that breaks the legal terms and agreements and it is extremely harmful to the growth of an organization. In addition to that, nowadays the cases of contract breaches are increasing day by day and this type of case may occur in Tata Motors.
The management of the company needs to be extremely careful and focused and take strong legal action against contract breaches. In this portion types of four contract breaches such as minor breach, actual breach, material breach and the anticipatory breach will be elaborated in detail.
Minor breach
A minor breach is an immaterial breach of contracts which is also known as partial breach of contract where the deliverables are received by the other party as on contract and the party on breach is failed to fulfil the obligations of the contract in a secure way.
In a minor breach the non-breaching party is required to perform as per contract and may be influenced to recover the damages due to the breach. Suitably, it argues for rescission of the breaching party from obligations of the contract where the breaching party is supposed to deliver the specific agreements with compensatory damages.
Actual breach or fundamental breach
Actual breach is the common and prevalent example of contract breach where the breaching party has failed to meet the performance obligations listed in the contract and is known as fundamental breach. It may be experienced that the unwillingness of a breaching party or inefficiency to deliver the obligations on due time is considered as the actual breach of contract.
If a party incompletely delivers the performance obligations is subjected to known as actual breach which have some remedies for the breaching party to pursue with economic compensation which directly influence the organizational reputation and financial stability.
It also accompanied the indirect losses which have a link with the breaches need to consider utterly to regulate the business transaction in the market through fulfilling the contracts earnestly with abilities and competence. Restitution, reformation, rescission, specific performance and money damages are some of the potential remedies for breaching contracts.
Material breach
The material breach is the most severe form of breaching contracts which is considered irreparable and a reasonable remedy determines the materiality of the breach. The simple compensation of the breaches is not considered as material breach and it usually reflects the failure in commitment and set duties according to contract.
The material breach context gave the right to the other party for rescinding the contract through which is not appropriate centrally for the project to deliver the right output. However, characterization, identification and repudiation are the three-decision making structure for executory steps for contract breaches (Simonds et al., 2022).
Anticipatory breach
The uncommon breaches are known as anticipatory breaches where the breaching party is well rewarded for the inability to perform certain obligations and anticipate their own flaws in front of other parties. This kind of breach is also readdressed through legal procedure for disrupting the business estimates poorly through organizational inability which need to be acknowledged at the time of signing business contracts (Yanan, 2022).
Anticipatory breach of contract is the result of lack of commitment, lack of skill set and over promising nature of business attitude which is not corresponding to developing the project as per client’s requirement and it demonstrates the unwillingness of the breaching party to support the contract.
Conclusion
From the above discussion, it may be concluded that Tata Motors has successfully designed procurement management which helps the company in reducing the operational costs of the company. Every company in the world wants to optimize the organizational spend as effective procurement management always helps the company in enhancing the effectiveness of SCM and value chain which utilize the organizational spend fruitfully.
Tata Motors also needs to select appropriate raw material suppliers who will supply all essential raw materials without any kind of disruption. The globally renowned automotive industry tata motors is selectively secures the safety of contracts and ready for change in time of disrupting events, as the Covid-19 pandemic has witnessed the several breaches of contract across the business world.
More companies are articulating business approaches with close interaction and engagement of partnership throughout the transaction for business responsiveness according to market demand.
References
Ahmadi, A., Pishvaee, M.S. and Torabi, S.A., 2018. Procurement management in healthcare systems. In Operations research applications in health care management (pp. 569-598). Springer, Cham.
Al-Zubaidi, I., 2019. Project Risk and Procurement Management.
Bienhaus, F. and Haddud, A., 2018. Procurement 4.0: factors influencing the digitisation of procurement and supply chains. Business Process Management Journal.
Gautami, S. and Kalyan, N.B., 2018. a Study on Financial Derivatives With Reference To Tata Motors Limited, Chittoor District of Ap, India. GJRA-Global Journal for Research Analysis, 7(4), pp.430-433.
Keshavarz Ghorabaee, M., Amiri, M., Zavadskas, E.K. and Antucheviciene, J., 2017. Supplier evaluation and selection in fuzzy environments: A review of MADM approaches. Economic research-Ekonomska istraživanja, 30(1), pp.1073-1118.
Khuan, L.S. and Swee, M.F.S.H., 2018. Technologies for Procurement: Current Trends and Emerging Trends. Emerging Technologies for Supply Chain Management, 4, pp.45-61.
Simonds, D., McnNeilly, E. and Hittelman, K., 2022. Characterization, Identification and Repudiation: Three Decisions on Executory Contracts. American Bankruptcy Institute Journal, 41(2), pp.22-49.
Tata Motors Limited. 2022. Tata Motors optimises its sourcing strategy. [online] Available at: <https://www.tatamotors.com/media-press-coverage/autocar-professional-tata-motors-optimises-its-sourcing-strategy-15-november-2018/> [Accessed 15 March 2022].
Yanan, G., 2022. Analysis of Anticipatory Breach and Unsafe Right of Defense. International Journal of Frontiers in Sociology, 4(1).
Yismalet, A.G. and Alemu, M.G., 2018. Improving project cost management practice and profitability of domestic contractors in Vadodara. Journal of Emerging Technologies and Innovative Research (JETIR), 5(5), pp.1334-1342.
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