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.
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.
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.