Excel, Purchasing, Supply Chain Management

In all likelihood, your first encounter with a balanced scorecard would have been your report card, where individual school projects, tests and exams were given a certain weight in accordance to their level of importance. In purchasing, this tool is put to practice in supplier selection and supplier evaluation. It is used to avoid risk, reduce costs, mitigate rogue or maverick purchasing and ultimately aid in the selection of the most qualified good or service provider. Performance metrics are listed in columns and are then scored using a standard numerical value range often being 0% to 100% or 1 through 10. Each individual score is then multiplied by the weight determined by their level of importance and are summed at the bottom, often converted into a percentage format. This is part 2 of a 2 article series that will provide the reader with tips and best practices for the creation of supplier evaluation balanced scorecards.

 

Now that you have selected your supplier(s) using the points outlined in part 1 of this article, titled Creating a Supplier Selection Balanced Scorecard in Excel, your supplier evaluation responsibilities are far from complete. Suppliers must be regularly tracked to ensure that KPIs including price, quality and reliability, or whatever metrics are important to your organization, are available for evaluation. Your Supplier Evaluation Scorecard will be broken down into two separate tables: your Supplier Evaluation Scorecard and your Historical Tracking Scorecard.

 

Supplier Evaluation Scorecard

 

The Supplier evaluation table will include columns possessing the following titles:

  • KPI Groups (optional)
  • Key Performance Indicators (KPIs)
  • Performance Target (optional)
  • Measurement
  • Acceptable Score
  • Score This Month
  • Variance from Acceptable Score


 

KPI Groups (optional) and Key Performance Indicators (KPIs)

KPIs include a description of the metrics used to evaluate the success of the good or service provider. The KPIs can be grouped into a KPI Area (optional) column that proceeds it using KPI groups such as Customer Service, Cost, Quality, etc.

 

Performance Target (optional)

The optional Performance Target column includes the quantifiable goal you wish for the KPI row to achieve. While it is nice to be specific in producing your supplier evaluation balanced scorecard, the point is to spend your time evaluating, as opposed to producing the most detailed document. So use the Performance Target column with caution.

 

Measurement

The Measurement column describes precisely how you will quantify the score associated with each KPI.

 

Acceptable Score

The following column titles are self-explanatory. The Acceptable Score is the score that you would accept. This is the passing score, not necessarily a perfect score.

 

Score This Month

The Score This Month column is where you do the actual scoring. The time interval does not have to be monthly. Use the evaluation time interval that is appropriate for your situation. It is important to remain constant in your scoring for the purpose of incorporating this data with the Historical Tracking Scorecard that we will get to in a minute.

 

Variance from Acceptable Score

A simple =Score This Month cell – Acceptable Score cell formula will deliver your Variance from Acceptable Score for each KPI. The resulting value is what will be used in your Historical Tracking Scorecard.

 

Historical Tracking Scorecard

 

The Historical Tracking Scorecard is where your historical scores are recorded and evaluated. This table can either be placed on the same tab, or on its own separate tab. The table is a stripped-down version of the Supplier Evaluation Scorecard including the optional KPI Area column if you added one, an identical KPI column, and your time interval columns. As this example uses months, we will add 12-time intervals to evaluate. Of course, you can evaluate weekly, quarterly, yearly, etc. Each time interval, copy the score from the Variance from Acceptable Score column in the Supplier Evaluation Balanced Scorecard and paste those figures into the time interval column that corresponds with it in the Historical Tracking Scorecard.




To make the Historical Tracking Scorecard more visual: turn it into a  line chart by selecting the entire table’s containments and clicking on the Insert Tab ==> Chart ==> Line




Right click inside the chart and click Select Data. In the Select Data Source menu, for each Legend entry, highlight the name field and click the KPI cell (start with the first KPI). Then highlight the Y values field and select the entire time interval ROW that are associated with that KPI, all 12 months in our example. Do not include your KPI name. Repeat this step for every KPI. For the Horizontal (Category) Axis Label field, highlight the row cells that indicate your time intervals (month numbers/names, quarter names, etc.) You now have a beautiful chart that will help visualize your historical scores for each KPI. Customize the chart according to your preferences.




Now that you have completed your Supplier Evaluation and Historical Tracking Scorecards, it is vital to spend the time to fill them out within the specified time interval (weekly, monthly, quarterly, etc.). If for whatever reason you miss a time period or neglect to analyze the evaluation data you spent time making clear and easy to interpret, you will have wasted the time you spent producing the scorecards. It is also crucial that you remain constant in your scoring standards. Otherwise your supplier’s performance data will be distorted over time.

 

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Purchasing

The purchasing department is in a strong position to leverage cost savings into profit. The profit leverage effect dictates that reducing operating expenses is more efficient than increasing sales. Situated at the beginning of the production process of a product or service, the procurement stage is in an excellent position to reduce overall costs, especially in the short term. This is why companies often resort to reducing headcount when they run into financial difficulties. Reducing operating costs is the fastest way to produce a short-term impact on the bottom line.

 

With this in mind, let’s talk about purchasing’s profit leverage effect. The following example will display how every dollar saved in purchasing goes directly to the bottom line, and it does so in a way that is more efficient that it would be through increased sales.

 

Your sales are $120,000 and your cost of goods sold (COGS) are $60,000. Within your COGS is your cost of purchased goods, which is 75% of your COGS ($45,000). Let’s say you reduce your cost of purchased goods through a combination of supplier relations and negotiations by 10%, you would save $4,500. Your cost of purchased goods is now $40,500. Your COGS are now $55,500.


Reducing costs of goods sold decreases your COGS from 50% to 46.25% of sales. Your operating income (net profit) therefor increases by the same amount. Let’s say operating income was $25,000 or 21% of sales, after the 10% of purchasing cost savings, net profit increased by 18% to $$29,736. That’s pretty good!

 

Now let’s look at what the sales department would have to do to achieve a comparable increase in net profit. To calculate how many more sales dollars would have to be generated we divide the needed additional profits ($4,500) by the operating profit margin (21%). The sales department will therefore have to sell an additional $21,428.57 worth of your product or service, which is the equivalent of increasing sales by 15%. And that does not factor in the marketing costs associated with increasing sales.

Which is easier? Decreasing the cost of purchasing by 10% or increasing sales by 15%? For most companies, that large of an increase in sales with no increase in advertising spend would be an incredible challenge, especially in the short run. On the other hand, reducing the cost of purchases by 10% is very attainable for organizations who have not traditionally managed purchasing as a strategic function.

 

Key Takeaway: every dollar saved through purchasing goes straight to the bottom line. By contrast, only 21% of sales goes to the bottom line, the remainder is consumed by the costs associated with doing business.

 

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Purchasing, Supply Chain Management

Purchasing supply chain management software is challenging as just like the supply chain, it includes a number of moving parts, departments and changing regions. When you migrate to a new software platform, all your stakeholders are affected. Why do we buy software in the first place? The purchasing decision is not really about the software itself. It’s about the issue that the software will solve, or at least, you hope it will solve.  In the context of a complex supply chain, here are some common goals which those in the position to purchase software wish to achieve:

 

  • Increased efficiency through the automation of a pre-existing manual business process
  • Offer new functionality, helping you do more or increase your organization’s quality of service
  • Compliment current software platform, so that well-functioning pre-existing systems can live-on
  • Futureproofing, ensuring the software spend down the line is minimized

 

Traditional supply chain ERP software is corporate organization outward focussed with a high emphasis on stakeholder integration and collaboration. You need to consider a product that will not only integrate into your organization’s business processes, but also those of your suppliers, vendors and other partners which you interact with on a regular basis. Some important considerations for a potential ERP implementation include:

 

  • How employees within your organization will use the software
  • How they do those activities and processes today
  • How your partners including vendors and logistics service providers interact with you today and if it will change their process. Will they have the desire to / do they possess the ability to interact with the software you are looking to procure.

 

Some organizations look at purchasing software from a procurement perspective. Their procurement teams might create an RFP and will have particular requirements. They will research potential providers and consult with different departments in a cross functional approach. Ultimately, a document will be created, outlining what they are looking for in a vendor, potentially in the form of a balanced scorecard. From there they will shop around for that software.

 

Another option is for the supply chain organization within the company to own the software purchasing decision. The organization is familiar with how they get products from purchasing to logistics to customer service to planning: all of those departments will be considered in some way. This organizational focus is in a better position to represent the specific needs of the various business functions. While the procurement approach is often more concerned with making the most feasible financial decision. Of course, the best approach to a major supply chain software procurement decision would be a combination of the two methodologies.

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Inventory Management, Purchasing

          Bankruptcy forced the DeLorean Motor Company (DMC) to shut down its Belfast, Northern Ireland production facility in 1982, with an inventory of over 1,700 brand new cars and millions of parts. During liquidation, Consolidated International acquired all of DMC’s remaining inventory. Meanwhile, Steven Wynne, a British mechanic specializing in DeLorean maintenance and restoration since 1982, opened a 40,000 square foot warehouse in Houston, Texas, meant to act as a centralized distribution centre for used DMC parts. In 1997, Wynne acquired all DMC inventory from Consolidated International, in addition to the DeLorean Motor Company name and logo.

          Initially, the acquisition was aimed to support Wayne’s maintenance, restoration and parts sales operations. He and his team have serviced a consistent stock of 35-45 DeLoreans belonging to owners from all around the world since 1987. They also sell parts to DeLorean owners and restorers. As those operations were still not considerably cutting into the new DMC’s parts stock, they began assembling brand new DeLoreans themselves.


         A DeLorean requires roughly 2,700 individual parts of which DMC has over 99%, with no opportunities for traditional inventory replenishment. To fill the holes in their inventory, the remaining less than 1% are rather easily reproduced, rebuilt or procured as used parts. As all original DMC technical specifications and drawings were also acquired, they are often able to reproduce parts using the original specs with CAD/CAM and 3D modeling. This, in combination with their current inventory, allows the modern DeLorean Motor Company to produce a maximum of 500 cars, while continuing its additional pursuit to be the most prominent facility for DeLorean service, parts and restoration.


     

        Since 2016, the new DMC has employed Acctivate as its inventory management software. Acctivate is utilized for inventory adjustments when parts are received in the distribution centre, whether reproduced or acquired as used parts. Those adjustments are then automatically integrated into DMC’s web store. Acctivate supports and is used to create assemblies (one part containing multiple parts) in addition to sales order management including open and closed sales order monitoring, the creation of pick tickets and sales order printing. Some service orders, such as full frame-off restorations, require 200-300 line items for labor codes and part codes.

We’re able to build a service order pretty quickly with Acctivate, especially with some of these big restorations– Sarah Heasty, Service Manager, DeLorean Motor Company.

         DMC uses Acctivate’s Business Activity Service Billing module to create service order quotes, where separate subtotals can be created for a customer’s engine, transmission, suspension, etc., providing increased transparency. The Business Activity Scheduling module is employed to track labour hours and parts used for each service order. Labour hour tracking helps with DMC’s capacity planning as parts are pulled prior to service, increasing efficiency.

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Inventory Management, Logistics, Supply Chain Management
Barcodes and their associated scanning guns have been a staple in inventory management. Whether implemented in a library for signing books in and out, or within a large-scale online retailer’s distribution centre (DC), the use of both wired and wireless barcode systems is widespread throughout the supply chain. Tech companies including the Vitech Business Group are currently shaking up the inventory management industry through their integration of voice-directed order picking. Their product allows for order pickers to receive picking lists audibly, then confirm the pick by reading the product name or code out loud , rather than scan it with a traditional barcode scanning gun. The technology, originally developed by Honeywell as Vocollect Voice Total Solutions, has been around for quite some time. Vitech has integrated it into the SAP Extended Warehouse Management (SAP EWM), a component of the SAP’s supply chain management suite of solutions. The recent adoption of Vocollect Voice Total Solutions by Patterson Companies Inc.: a distributer of dental and animal health technology, products and equipment, will be used to demonstrate the effects of voice-directed order picking on the supply chain. This article will provide the reader with an understanding of the subsequent advantages in addition to some risks that may arise in inventory management.




Benefits


Increased picking speed and efficiency

With voice-directed order selection at Patterson, order fillers operate 25% faster than with the traditional barcode scanning system. In fact, pickers were even faster on their initial attempts with the new system than they were on the legacy barcode system to which they were accustomed.

Paperless


Vocollect displays the pick list audibly at the push of a button, with the ability to repeat the audiable list. This alleviates the need for printed picking lists. A reduction of paperwork generally contributes to greater efficiency.

Less Mechanical Error


Damaged barcodes tags lead to errors in the scanning process causing order pickers to input the code manually. This not only causes a delay, it also can lead to input errors. A literate order picker will possess the ability to discern what a marked-up tag represents, where a barcode scanner cannot.

Reduction of training time


Patterson claimed a greater ease and speed for training using the hands-free voice system compared to training employees on a traditional barcode scanning system. This is especially beneficial for temporary order picker hires during the holiday season.

Employee Preference


Paul Courchene, Logistics Core Team Leader at Patterson claims that “No one wants to use the radio frequency (RF) guns…They all want to go hands-free and use voice”. The BBC’s Amazon The Truth Behind the Click Panorama documentary highlights how the constant countdown beeping coming from scanner guns leads to emotional distress, nightmares and has provided evidence of increased risk of mental illness.
 

Employee Pride


Hands-free voice systems are found to produce greater employee cognitive engagement in a repetitive task, leading to increased employee job satisfaction. There is also an institutional benefit derived from the pride associated with the feeling of doing things differently than other organizations.

Risks

Human Error


While Vitech boasts of superb accuracy, voice-directed picking requires validation by the order picker at the pick and at the put in, therefor requiring a second visual confirmation of their voice confirmation. The risks of human error are clearly a possibility within this process. It is up to the inventory analyst to determine whether the increased efficiencies derived from voice-directed picking outweigh the risks of human error.

Barcode Still Required


It should be noted that the implementation of a voice-directed order selection solution will not completely do-away with barcode scanners. As was the case in the Patterson case study, barcode scanning continued to be utilized for receiving and put away functions.

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Job Search, Supply Chain Management

The SCMA Alberta 2017 Conference in Red Deer, Alberta saw The Canadian Supply Chain Sector Council launch new videos profiling People in Supply Chain.

These video profiles focus on professionals working in Canada’s supply chain sector in a variety of industries. They provide a sample of the supply chain management career options. All english videos feature french subtitles and french videos include english subtitles.

View this post which includes 7 more career profile videos.

Purchasing/Procurement

Melinda Nycholat
Director, Contract Services
Defence Construction Canada


Takeaways:
  • Civil engineering and construction backgrounds are very useful in procurement roles

  • Cross-functional teams are prevalent

  • Procurement at the Department of National Defense (DND) provides an ever-changing landscape of daily challenges)



Transportation

Cody Birkett
Superintendent
Cando Rail Services Ltd.

Takeaways:
  • Mechanical backgrounds are preferred

  • There is a communications aspect to rail transport

  • Physical fitness is important

  • A culture of safety (Track SMART)


Logistics

Stefanie Erickson
Logistics Coordinator
W.A. Grain & Pulse Solutions


Takeaways:
  • Opportunities for advancement (from part time office assistant to regional logistics coordinator)

  • Scheduling and coordination proficiencies are vital responsibilities

  • Technical dexterity is important (as within any industry)

 

Supply Chain

Catherine Finnie-Wolff
Team Lead, Supply Chain
Access Pipeline

Takeaways:
  • Cross-functional team management is vital

  • There is an importance to providing solutions by thinking outside the box

  • Technology appears to be lagging at least within this particular organization

  • On the job training is common


Support Services

Deidra Helmig
Senior Safety Consultant
Boreal Services Group Inc.

Takeaways:
  • Relationship building is important as always.

  • Many women work within safety.

  • There will always be a human element in safety


Warehousing

Meagan Jonsson
Operations Supervisor
DHL Supply Chain



Takeaways:
  • A lot of ethnic diversity.

  • Many women are currently working within warehouse settings.

  • People will always be needed to verify stock quantities.

 

Transportation

Jamie Montesano
Shipper/Receiver
Total-R Inc.



Takeaways:

Opportunities for promotions.

  • Engaging work that results in job satisfaction.

  • Hours are regular, overtime is rare.

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SAP, Supply Chain Management

I received my SAP TERP10 Associate certification in the mail this week. Actually, the full name of the distinction is C TERP10 67 SAP Certified Application Associate – Business Foundation & Integration with SAP ERP 6.07, which required an intensive two-week long course and three-hour exam. Pursuing this certification was important to me as I aimed to solidify the past 8 months of recently completed hands-on Supply Chain Management focused SAP training. In addition, I wanted to expand on my knowledge of the Purchase-To-Pay (purchasing/procurement), Plan-To-Produce (manufacturing), Order-To-Cash (selling), FICO (financial and management accounting) and Project Systems (project management) SAP proficiencies.


Supply Chain Management
Why ERP?


ERPs (Enterprise Resource Planning) software is used by large-scale organizations to aid them in communicating their flow of raw materials and finished goods from manufacturer to consumer. It provides full financial and inventory management integration at every stage of the buying, selling and logistics functions. The key factor with any ERP is integration. In an internal intranet type network, information is restricted to within the organization. Enterprise Resource Planning software allows for major time savings, and ultimately cost savings, derived from the real-time sharing of information between buyers, suppliers, warehouses as well as across internal departments. There are three major players in the Supply Chain Management ERP market: SAP, Oracle and JD Edwards, where SAP is considered by many to be the industry’s gold standard.

VMI 

An Advantage of ERPs in Supply Chain Management

 

One example of buyer-supplier integration at work relating to supply chain management is Vendor Managed Inventories (VMI).  In VMI systems, the supplier (vendor) is responsible for maintaining the buying organization’s inventory levels. The supplier has access to the buyer’s inventory levels and ships out inventory in accordance to agreed upon thresholds, creating purchase orders in the process. An ERP such as SAP is used to communicate the buyer’s inventory levels to the seller. It can be further integrated to both organizations’ supply chain through its incorporation with the buyer’s or seller’s private carrier, or a third-party logistics provider.

 

 

Supply Chain

An Advantage of Vendor Managed Inventories


VMI directly results in a reduction of the Bull-whip effect, where large fluctuations in demand from a consumer or industrial retailer oscillates up the supply chain through the wholesaler, distributor, manufacturer, and raw materials supplier. Real-time communication of inventories therefore leads to the cost savings associated with increased inventory management efficiency in addition to insurance against inaccurate forecasting of demand.

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Inventory Management, Supply Chain Management

In pursuing my Post-Graduate Certificate in Supply Chain Management – Global Logistics, I could not help to draw parallels between the components of SCM and my previous career in mass-participant sports event operations. This indirect background in Supply Chain greatly facilitated the program as I had a constant supply of past professional examples to which I could relate many concepts. The biggest take-away was that all three segments of Supply Chain Management, which include: purchasing, inventory management and logistics are required for a well-managed event, whether on a large or small scale. This article focusses on how mass participant event operations relates to the supply chain management component of inventory management and is the third in a series of three articles on the topic. The first on purchasing can be found here and the second on logistics can be accessed here.

 

Warehousing

 

In event operations, both Just-In-Time (JIT) and traditional warehouse inventory (AKA Just-In-Case) is employed. Re-usable equipment and other objects are stockpiled in storage locations that can include a warehouse, shipping container, trailer or within the event’s office space. Trailers and shipping containers are particularly handy as they are both modular and mobile. One or all containers can be sent to the event venue or moved to an alternate lot and as they are already packed, there is no need to transfer the equipment from storage to a transportation device. Trailers are especially useful for events that tour multiple locations throughout the season and can incorporate highway with rail transportation in the form for intermodal piggybacking. Operations managers will want to perform the light integrity test to ensure the container’s contents will be safe from the elements. However, trailers and shipping containers are not perfect: items stored inside are difficult to access and their outdoor placement puts them at risk of theft, overheating and freezing.












On-demand warehousing is often an attractive option for events who desire the reliability of traditional warehousing, with the scalability of an on-demand service. Storing items inside a traditional warehouse allows for greater access to items that are required by event staff on a moderate basis, regular to intermittent item picking and offers protection from the elements. On-demand warehouse space also allows for organizations to take advantage of potential economies of scale offered in the form of lot size discounts and transportation discounts. Here an event can spread out the procurement of a lot size of items across multiple events, acquiring time and cost savings. Warehouses are an ideal storage location for safety stock.




Just-In-Time

 

For items that are required for the specific event, it often makes no sense to have them delivered to your warehouse, just to have them loaded up and transported to the event venue at a later date. As many medium to large scale events have access to their venue in the days or week leading up to the event, inventory holding savings, transportation savings and time savings can be achieved by having those items shipped directly to venue. This works particularly well for high volume items that you will receive in the days leading up to the event, including food, water, new signing, sponsor banners and other last minute items. The Just-In-Time benefit of eliminating inventory carrying costs is countered by the high risk of stock-out (in this case, not receiving your items on time), due to unexpectedly long delivery lead times. JIT should therefor only be employed with trusted suppliers, with reliable carriers, and for items that make sense to only arrive in the days before.

 

 

A combination storage location types

 

On-demand warehouse space can be useful in alleviating the downsides of trailer and shipping container storage, yet warehousing overhead costs need to be taken into account. It is not uncommon for large scale events to diversify their inventory across office space, warehouse space and trailer/ shipping containers. This was you can take advantage of the mobility of shipping containers and trailers while taking advantage of the convenience of in-office storage locations for items that require regular access. In addition, items that require temperature control and moderate access, whether in the form of intermittent picking or otherwise will benefit from in-demand warehousing.

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Logistics, Supply Chain Management

In pursuing my Post-Graduate Certificate in Supply Chain Management – Global Logistics, I could not help to draw parallels between the components of SCM and my previous career in participant sports event operations. This indirect background in Supply Chain greatly facilitated the program as I had a constant supply of past professional examples to which I could relate many concepts. The biggest take-away was that all three segments of Supply Chain Management, which include: purchasing, inventory management and logistics (transportation) are required for a well-managed event, whether on a large or small scale. This article focusses on how mass participant event operations relates to the supply chain management component of logistics (or transportation) and is the second in a series of three articles on the topic. The first on purchasing can be found here and the final topic on inventory management can be found here.




Logistics (transportation)

 

As in any industry, after you purchase your goods or services, they must be transported to your storage location, whether a warehouse or directly to your event venue as per Just-In-Time inventory management, but more on that in volume 3. Many customized products procured in China are ordered well in advance of the event through various methods of forecasting, as mentioned in volume 1. Do you see how all these concepts tie together?. In doing so the event will take advantage of the cost savings associated with longer delivery lead-times of shipments made by boat.

 

Shipping by Boat vs Air

 

Long story short, shipping goods overseas by boat is many times less expensive than by air due to the economies of scale as boats are many times larger than cargo airplanes. A marathon, for example, will require finisher’s medals, age category and overall awards/ trophies most often manufactured of zinc in China. It is best practice to include a considerable amount of safety stock in an event’s initial order to take advantage of substantially lower shipping costs for shipments made by boat. Ordering the above-mentioned items for a 15,000-person event will cost thousands of dollars more if the shipment is made by air. The trade-off is that shipments made by sea take two to three months (including manufacturing time) while shipments made by air take two to three weeks, also including manufacturing. Often an inaccurate forecast will force the event director to place a last-minute order by air, causing the value of the goods to be overshadowed by the cost of shipping. The director would have been better served by ordering additional safety stock with the initial order that was transported by boat.

 



Shipping by Truck, Rail and Intermodaly

 

Not all event specific products are produced or customized overseas. Inexpensive participant shirts, as are required for our marathon example, can often be purchased and customized within the event’s domestic market or by a neighbouring country. For an event in Canada it is slightly less expensive to order inexpensive custom technical shirts or cotton t-shirts from the United States. Either way, these items will be shipped by truck, or possibly intermodaly using a combination of truck and rail. Delivery lead-time will depend on the geographic distance between the supplier and the buyer in addition to the infrastructure quality between the two points. If the shipment of goods cross an international border, it will require customs clearance, the payment of import tariffs and/ or duty, whether transported by truck, rail, air or any other mode of transportation. This service is often performed by the freight forwarder employed by the party placing the shipment, whether buyer or supplier or can be outsourced to a customs broker.


Freight Forwarders

 

Use a freight forwarder: they will make your life easier. Event operations professionals are well versed in most aspects of event operations. Customs clearance and transportation coordination is rarely one of their core competencies, and as such should be outsourced. Freight forwarders reduce costs and increase efficiency through their full-service provision of all transportation needs, allowing for event operations professionals to focus on what they do best.

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Purchasing, Supply Chain Management

In pursuing my Post-Graduate Certificate in Supply Chain Management – Global Logistics, I could not help to draw parallels between the components of SCM and my previous career in participant sports event operations. This indirect background in Supply Chain often led to constant back-and-fourth between my instructors and I. The biggest take-away was that all three segments of Supply Chain Management, which include: purchasing, inventory management and logistics (transportation) are required for a well-managed event, whether on a large or small scale. This article focusses on how mass participant event operations relates to the supply chain management component of purchasing (procurement) and is the first in a series of three articles on the topic. The remaining two will focus on logistics and inventory Management.


Forecasting

An event will require the procurement of various goods and services to ensure a quality experience for their participants. Needless to say, large scale events will require more goods and services than medium to small scale events, while benefitting from economies of scale. As mass participant events often allow individuals to register for the event up until the days, or even the day before that event is to take place, accurate forecasting is required. In the case of a marathon, organizers often use a 3-year moving (or rolling) average of registration numbers as of a certain calendar date (sometimes every day of the year) to forecast based on historical data. For example: on September 1, 10,000 were registered in 2015, 11,500 were registered in 2016 and 11,250 were registered in 2017. Therefor we can forecast that 10,917 will register by September 1, 2018. That data is to be compiled in Excel, where a trendline can be used to forecast sales. You can now order the required goods (food, water, medical equipment, timing chips, merchandise, participant shirts, finisher’s medals, etc.) and services (medical staff, parking attendants, waste disposal services, massage therapists, physiotherapists other contractors, etc.).





The Forecast is Always Wrong


The problem with a moving average is that it will lag behind the trend, so it is advised to utilize qualitative (Delphi method, market research, and historical life-cycle analogy) data in combination to quantitative (historical) data for forecasting purposes. New events are forced to rely completely on qualitative data, as no historical data exists. It is best practice for event operations professionals to order extra quantities (safety stock) to mitigate an unexpected last minute surge in registration (inaccurate forecast), as I can assure you that all hell will break loose if you under forecast participant shirts or finisher’s medals. It is often less expensive to order hundreds of one particular item from overseas that are shipped months ahead of time by sea, than a small order of last minute items shipped by air.

However, in the case of merchandise, you want to sell out. As marginal profit is most often lower than marginal cost per unit, the cost of not selling an item of merchandise outweighs the cost of selling an additional item. Therefore your optimal order quantity is most likely lower than your estimated demand. Chances are you overestimated demand anyway as the forecast is always wrong. Plus the inventory carrying cost associated with excess inventory will cause all kinds of headaches down the road.

 

Strategic Partnerships

As is often the case when negotiating contracts in a Just-In-Time or traditional Order-To-Stock environment, the creation and fostering of strategic partnerships is paramount. In my experience, it is advantageous to give a little extra, for example: taking a less hardline stance when negotiating price. No one appreciates feeling ripped-off, which will lead to cognitive dissonance and a toxic relationship moving forward. Quality, especially in the case of a top-tier/ premium event, is rarely worth sacrificing. Delivery lead time is also rarely worth delaying, with the exception being for the most experienced of event directors.

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