Two lessons I never thought I’d learn from sports

Posted on June 2, 2016 Published by Leave your thoughts

By Kieran Cottrill

One of the great things about sports is its many intricacies. A plethora of minute details can make a huge difference in the outcome of a contest. I’ve watched innumerable games in every main sport, and I can safely say that I’m still learning. Here are a couple of interesting things I found out recently not about games, but about the sports business.

Lesson #1: Big demand swings can cause a big problem for sports teams and their suppliers.

Sports organizations’ supply chains are essential to their success because merchandise makes up a huge chunk of their franchises’ revenues. In sports, teams and players can go from being heroes to flops in a very short time. As a result, the demand for merchandise is volatile, which in turn creates supply chain challenges.

2016 happens to be a year in which a particular British soccer team became a phenomenon. In fact, some people are calling it one of the best underdog stories of all time. In the Barclays Premier League, one of the most competitive soccer leagues on the planet, Leicester City won the League title. At the beginning of the season the odds of the team becoming champions were 5000:1. Naturally, consumer demand for Leicester City jerseys and other team apparel went through the roof during and after their title run. As a consequence, the supply of Leicester City merchandise ran dry months before the demand started to subside. Leicester City and its suppliers lost a fat stack of cash – about $1.5 million by one estimate – from foregone sales due to the unexpected demand.

There are other examples of massive jolts of team and player popularity. As the 2016 NHL season comes to its conclusion, I can recall one player this season who shot up from obscurity and took the fans by storm in a matter of days: John Scott.

Scott was your typical NHL enforcer checking in at 6’8”, 280 pounds, and earning less than $1 million per year. But this season, the undrafted Scott managed to earn hockey fans’ love and was voted into the All-Star Game for absolutely no reason other than its hilarity. The NHL’s efforts to stop Scott’s appearance at the game backfired because fans got even more behind him and his popularity soared even further.

Very soon, Scott’s jersey was one of the most sought-after hockey jerseys in the U.S. Before 2016 he had probably never sold a jersey in his career.  As a side note, Scott ended up winning the Most Valuable Player during the All-Star Game and now finds himself playing minor league hockey – talk about irony.

And how about Stephen Curry’s rise to the pinnacle of basketball popularity? Not long ago, LeBron James and Kobe Bryant dominated the top jersey sales by a wide margin year after year. Then almost out of nowhere, Curry jumped on the scene, and a few years later he has the largest selling jersey in the NBA.

Lesson #2: Considering the fact that demand in sports merchandising is vulnerable to change, sports organizations need to be savvy about managing their supply chain to avoid product shortfalls.

Some sports organizations handle demand volatility by leaving their apparel manufacturing as late as possible by deploying a supply chain tactic called postponement. By delaying the final order of how many and which jerseys they want from their suppliers, decision-making is based on a much more accurate representation of demand. Check out MIT Professor Yossi Sheffi’s blog post on the Leicester story for more information on sports supply chains.

Other organizations in the sports business build flexibility into their business models. Some years ago Reebok was the supplier of the NFL’s official apparel. Reebok came up with the idea of having a large supply of blank jerseys at the ready should an unexpected spike in demand occur.  If a player’s popularity suddenly increased, they would quickly stitch the blanks with the individual’s name and have enough jerseys to meet demand.

The fact of the matter is that in sports, it’s truly impossible to predict what will happen next both in individual games and in the business. We can never be certain who the next sports sensation will be and where he or she will come from. However, one thing is certain: spontaneity makes it challenging for sports organizations to design and manage supply chains capable of supporting such a volatile business.

Just imagine. If kids around the globe were ordering jerseys of plumbers, garbage men and stockbrokers, those industries would be subject to the same supply chain and logistics issues that sports teams endure. But then again, I guess these professionals have their own supply chain issues to deal with.

Kieran Cottrill is studying for his degree in International Business, Marketing and Latin American and Caribbean Studies at Fairfield University. He is also an aspiring blogger.

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