FIFA World Cup 2014- Supply Chain Management’s Baptism By Fire
Posted in Operations & IT Articles, Total Reads: 2435
, Published on 03 September 2014
This article is the 2nd Prize Winner in the Article Contest August 2014
Germany have lifted the cup for the first time since its unification and Lionel Messi still doesn’t have the golden cup to his name. There have been numerous moments of joy and despair for billions across the globe who watched the biggest sporting extravaganza on earth- FIFA WORLD CUP 2014.
Reports suggest that nearly half of the world’s population (around 3.5 billion) watched this edition of the World Cup. When such gargantuan number of people engage themselves in a single event then there ought to be some serious business to be made out of it.
Nearly 600,000 tourists visited Brazil during the event and spent a whopping $ 2.6 billion apart from the 3,000,000 Brazilians who watched the world cup with a collective spending of around $ 7.9 billion. These are some compelling numbers and these directly translate to business across a multiplicity of sectors. However, business is not so easy. There is a lot of planning involved to meet the demands of millions of people. All the companies had started their preparations months before the first kick of the ball in the world cup. The planning had to be meticulous, comprehensive and flexible at the same time. There were countless moving parts involved which had to be in sync for the delivery of the products or services to the consumers (fans). The business plans had to revolve mostly around the production and supply chain processes to ensure that the right good is available at the right place at the right time. This is essential as no company wants to lose out on such an immense opportunity just because of consumer dissatisfaction. However, there is another side to the planning. The companies had to produce the right amount as overflowing inventory to over compensate for the massive demand is never a good thing. There have been many instances where companies had to withstand huge losses due to wastage of goods stocked up in the inventory.
The most obvious good in demand was the Brazuca ball along with the various national team jerseys. The Brazuca ball for instance had been finally approved after 2.5 years of extensive testing. The most interesting part of the story is the production place of the ball. Surprisingly, it is Pakistan’s Sialkot, a country which is way off the footballing radar. Adidas outsourced the production process to the Forward Sports Factory which churned out an astounding 18,000 balls a day during the peak demand period of the world cup days. The material for the ball, which included rubber, latex, cotton, polyester, were sourced from China, Vietnam and Pakistan. From the distant land of Sialkot the balls travelled to retailers around the world and of course to the 12 World Cup venues. Adidas estimated total revenue of $650,000,000 from the Brazuca ball in and around the world cup. Efficient supply chain management goes a long way in translating these forecasts to real numbers.
What poses a real threat for businesses is the unpredictability of the market demand. All planning can go kaput if a plan B is not kept in place and if contingency planning has not been done. For instance, the sale of Cameroon jerseys skyrocketed during the 1990 World Cup after their awe inspiring journey to the semis. These are the moments which transform good companies into great ones. Successful companies not only have sufficient inventory balance but also have the ability to scale up to meet demand and capitalize on the opportunity. A pragmatic and intelligent market forecast was the order of the day for businesses catering to the world cup boom.
Food and beverages is the one of the most booming sectors during such an event and World Cup 2014 was no different. A mind boggling 750,000 litres of beer and 390,600 hot dogs were served to the football fanatics during the event. In order to meet such mammoth demands there had to be perfect sync between the suppliers of raw food, production of finished goods and peak consumer demand- again efficient supply chain management, from end to end.
Often we tend to overlook the peripheral goods associated with any major event. However, they are an important and lucrative source of business as well. Take for instance the digital TV market. The world cup catalysed the growth of global digital TV sales by accelerating the growth rate from 3.8% to 5.5 % between 2013 and 2014. Again proper forecasting and a smooth and efficient supply chain network ensured that the consumers had the TV fitted in time to enjoy the matches from the comfort of their homes.
Looking into the success stories one should not overlook the failures that such events invariably bring to the fore. A case in point is the much publicized and criticized planning and execution of the stadium building activities in Brazil. For instance, the Sao Paulo stadium was without the regulator’s approval even minutes before the kick-off of the opening match. Many more construction projects had to be scaled down or abandoned altogether due to faulty planning and forecast as well as poor supply chain functioning. Businesses should take a lesson from the books of World Cup 2014 in that failure to anticipate and respond to changes in demand can lead to a complete business failure.
In a nutshell the factors which led to the overall success of supply chain management of the various businesses during the world cup are- intelligent and pragmatic forecasting, reduction in overall supply chain costs, over performing expectations and being flexible in times of dynamic market demands. An event as large as the world cup is the perfect testing ground for the supply chain management of a business and it is becoming increasingly important to improve a business’ supply chain management to bring about overall success for the business. However, with supply chain networks growing more complex by the day this is easier said than done. The important thing is to implement and improve upon the plans that led to success and try to eliminate the mistakes which led to failure even in such a booming economic period owing to the world cup.
This article has been authored by SAYAN KAR from IIM RANCHI
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