Spend Matters welcomes a guest post from Pranav Padgaonkar of GEP.
The Adidas “Brazuca” was the official ball of the 2014 FIFA World Cup. Over the last month, more than a billion people watched this ball from more than 200 countries! Talk about sensitive procurement categories. To add to that, the last World Cup’s “Jabulani” was mired in an “aerodynamics controversy,” resulting in even more pressure to get this one right. Let us look at how complex it really is to source a World Cup football.
Some facts about the Brazuca:
- This very well may be the most watched object in the world during the last month, after the sun and the moon.
- The balls themselves earn a revenue in excess of $1 billion, while the ecosystem spawned around them earns several times that. A company solely doing everything related to the ball would enter the fortune 500!
- This is the roundest football ever made and also has the highest ever flight speed, while maintaining a low water absorption ratio. It has had no issues from any team.
- The ball has been developed over four years, with testing by over 400 professional football players.
The first sourcing event involved is when FIFA chooses an official football partner. For FIFA this is a large marketing deal, of which the actual supply of flawless balls for the event is a small part. Thus, their selection criteria include the supplier’s manufacturing scalability, past reputation, global reach, development capability, and of course, monetary offer regarding revenue sharing. The negotiation in this case is extremely complex, as it relates to the often-intangible “value of brand association” and the volumes are difficult to forecast beforehand. The incumbent supplier Adidas has a strong advantage.
The second layer of the supply chain is where Adidas sources the actual design and development, manufacturing, testing, and distribution of the ball – four separate projects, even though inter-connected. Given the aerodynamics issue the previous ball faced, the design and development is extremely sensitive and again the incumbent Long Way has a strong advantage. The testing portion is a deal struck backwards with FIFA and over 30 professional teams under their aegis. Lastly, the distribution of the ball has to be sourced, again in a flexible manner because we don’t know what volumes will be in each country or city.
The third layer is when Long Way realizes that they cannot produce the more than 50 million balls by themselves. Then, they have to source the contract manufacturer Forward Sports in Pakistan. At this point, the scalable, flexible manufacturing capability becomes extremely important. Also, the supplier’s ability to meet the stringent quality standards needs to be verified. Hence, the separate partner Forwards Sports was selected purely for manufacturing.
A fourth layer is when Forward sports selects a logistics partner to handle the distribution of the ball. Keeping in mind the need for suddenly changing volumes, the flexible chain of the contract manufacturer is critical.
FIFA and Adidas cannot stop at layer 1 and have to maintain oversight all the way through layer 4, because any flaw in the design, manufacturing, or distribution reflects negatively on their brands. Talk about tracking suppliers down the supply chain.
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