The impact of total costs and strategic supply on risk management in project business

Abstract

Purchasing and supply management can have a major impact on the success of project business. Project purchasing can cause huge problems for projects, but it can also be a major source of success. This study investigates the effect of total cost components, supply management capability and the status of supply management on risk management performance in the context of project business. A survey was conducted to collect data from companies engaged in project business in Finland. Based on the responses from 99 firms, it was found that the strategic status of supply management, supply capability, costs before and after purchasing and project duration have a significant effect on risk management. This gives a specific indication of where to focus risk management actions. Risk mitigation strategies, however, seem to be systemic in their nature in the sense that simultaneous strategies are probably needed to assure the effective flow of supply.