From A-Z, how a football reaches a consumer's doorstep, by Kewill
Written by Evan Puzey (pictured, right), CMO of Kewill
Consumers rarely think about how a product- such as a football- makes its way from parts in a factory all the way to their doorstep. They think about how quickly they can get hold of their preferred brand and model, but never consider all of the complicated steps that make up the transportation and logistics process that gets stock to the store or warehouse. This article provides insight into the many steps that a product as ubiquitous as a football must go through on its journey from the factory to the consumer’s home.
Approximately 40 million footballs are sold each year around the world, and sales are expected to increase significantly during the two month period leading up to the World Cup, which is being held in Brazil currently. The World Cup is regarded as one of the most watched tournaments on the planet and draws the attention of billions of viewers around the world, who don’t often think about how footballs make it to the World Cup pitch or to their home.
The football goes through three key phases on its trip to the consumer.
Most often today, footballs are typically manufactured in a Far East location with good logistics links and proven manufacturing expertise, yet (relatively) low labor costs - such as Shenzhen, China, which is located about 25 miles outside of Hong Kong. There, manufacturing is typically undertaken by a sourcing partner rather than by the recognisable brand owner itself.
The logistics process is further complicated by the fact that the components required to manufacture the ball will need to be shipped from various locations via road, rail and air. When all of the components are added together, the total distance travelled could be up to 10,000 miles, before the product is even assembled. These components are subject to customs compliance and governmental checks, even within China, where even different provinces have their own regulations and procedures.
Multimodal transportation stage:
Producing the goods is only the first step. Once the footballs clear the production line and the quality testing process is complete, the distributor’s logistics partner then tackles the long journey to the point of sale. Goods are loaded at the factory in Shenzhen onto trucks where they will be shipped and stored at the logistics service provider’s (LSP) warehouse located close to the Hong Kong Container Port or Airport. The containers are carefully stuffed to protect the product against damage (in line with the distributor’s strict requirements), with the correct quantities for each destination. Once the shipment clears customs, the appropriate documentation must be completed and submitted. Then, the consignment of balls will be sent to port services where it will be loaded for onward transport by land, air or sea. It will need to clear customs again once they reach their destination. Advance notification and filing of declarations to U.S., European and a growing list of other countries customs authorities is required under the U.S. Importer Security Filing (ISF) and the EU Import Control System (ICS) and others.
Delivery & distribution stage:
Once the goods have arrived in the destination country, they need to be distributed to the right location for fulfilment (in a large country like the U.S. this could be a long distance). The ‘final mile’ is frequently the most complex part of the entire transportation process.
The containers are first de-stuffed and sorted from the carrier that they arrived in. The trucks are then loaded with goods, which are transferred to a warehouse (either owned by a distributor or by an LSP carrying out value-added services on their behalf) for storage and finishing (i.e. packaging, labelling). The packaged soccer balls are then distributed to regional distribution centers, where they will be shipped to stores and online fulfilment centers. The balls are finally inflated and put on shelves or packaged for online fulfillment for delivery to the consumer’s doorstep.
The process outlined above is complex and typically involves the coordination of multiple global, regional and local transportation partners and will certainly require an in-depth knowledge of international logistics, security and customs procedures. Delays can occur due to bad weather, customs checks or even civil unrest disrupting carrier schedules. These delays can have significant impacts, by creating a domino effect that can delay each subsequent stage of the process, leading to increased costs. Ensuring goods arrive on schedule, and that all of the local partners are kept informed at each stage, is a major undertaking.
As global trade continues to grow, it’s becoming increasingly difficult to adhere to the ever increasing and changing rules and regulations, especially when goods are crossing international borders. However, a multimodal transportation management solution that integrates supply chain processes such as multimodal transport, warehousing and compliance can help companies ensure that they are able to more efficiently transport goods, like soccer balls, from one destination to another. A single platform can provide global levels of visibility and control allowing you to manage processes and take action that is critical to the success of business operations.
EY and Harvard Law discuss barriers in Contract Management
Contract management is a crucial discussion for procurement professionals as negotiations require a more specific outcome. However, some organisations are experiencing significant barriers to developing their contracting processes. Ernst & Young and Harvard Law School Center have discussed survey results in relation to the current state of contracting and explain where the issues arise.
The Legal Profession survey (part of the 2021 EY Law Survey) highlights the perspectives of 1,000 professionals from across the globe in law, procurement, business development and commercial contracting.
Out of all the major companies surveyed, over half of them say they are experiencing significantly reduced revenue and are missing out on important opportunities due to poorly managed contracting processes.
Some of the key findings from the survey:
- 92% of organisations in the survey said they plan to transform their contract handling procedures.
- 98% of respondents said they face critical barriers in the process of developing contract management.
- 38% of organisations said they have tried and failed already to implement a better contract management procedure.
- 57% said they had experienced less positive revenue due to inefficient contracting systems.
- 50% of respondents said they had missed profitable business opportunities.
Kate Barton, Global Vice Chair, EY, has expressed her opinion on the survey, “Revenue growth is a fundamental goal for any commercial organisation and effective contracting processes play a crucial role in making that possible. Contracting teams around the world know the value they can bring, and they are making real efforts to transform, but the survey brings into sharp focus a whole range of obstacles that they must navigate if they are to make the improvements they are aiming for.”
What will organisations need to address to develop their contracting methods?
Many organisations are under pressure to reduce costs, specifically contracting professionals. This is something that nearly all of the survey respondents will be looking to do in the next two years, while a third of larger organisations aim to scale this to a 30% reduction in contracting costs.
There is a certain lack of clarity among organisations as to who is responsible for contract management. It is unclear to most how the contracting process should be managed; perhaps this could be because it involves an agreement between various stakeholders. Around 59% of legal departments believe they have the leading role, while a similar number of contracting staff also share this view. 39% of business developments professionals believe they are to hold the decision-making power.
Utilisation of Technology
There seems to be a lack of capability among organisations to analyse and manage contracts. According to the survey, around 70% of organisations have a technology strategy in place to manage contracts; the majority still lack the necessary data to utilise it to full capacity. This is likely caused by insufficient knowledge for implementation that is likely a direct result of a skills shortage, which 34% of organisations have reported as an issue that limits them.
Insufficient Contracting Processes
A lack of a defined contract drafting process will significantly limit how effective the contract will be. Global Legal Managed Services Leader at Ernst & Young, John Knox, explains, “the importance of getting contracting right cannot be underestimated.”
Around 49% of survey respondents say they don’t follow a defined procedure, and 78% say they do not have a system for monitoring contractual obligations.
Knox says, “with the right transformation efforts focused around people, process and technology, contracting can actually become a business enabler and differentiator. The survey shows that one way in which organisations aim to tackle these challenges is through working with subject matter leaders and external providers.”
Meanwhile, David B. Wilkins, Lester Kissel Professor of Law, Vice Dean for Global Initiatives on the Legal Profession, and Faculty Director of the Center on the Legal Profession, Harvard Law School, says, “Contracts are at the core of every business. They determine how growth happens and how risks are managed. It is therefore absolutely crucial that organisations have effective systems and processes to manage every aspect of the contracting process, from negotiation and execution to termination or renewal, as well as an accurate understanding of the obligations, benefits, and risks across the entire spectrum of their contracts.
For more procurement insights, check out Procurement magazine.