Procurement Leaders
Procurement Leaders

Procurement In Action: Rio Olympics 2016

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Procurement has an integral role behind the scenes of most businesses, yet financial savings or excellent supplier management is often, at the very most, only noticed internally within the company. When helping to deliver an international event that will be showcased around the globe, however, the function has a very visible impact and role in ensuring delivery is on time and successful.

 

Between 5 and 21 August, as households all over the world tune in to watch athletes from 206 countries compete in more than 300 events at the 2016 Olympic and Paralympic Games, which will be held in Rio de Janeiro, the impact of procurement will be seen by all.

 

The road to hosting an Olympic Games is never a simple one. The magnitude of the task of creating South America’s first Olympics lies in the fact that the entire competition, business strategy and procurement function had to be built from scratch.

 

For an international sporting event, until the bid has been won by the host country, the processes and teams in place are somewhat fantastical. As such, it has been a long, unpredictable journey for Fernando Cotrim, who joined the Rio 2016 organising committee as logistics director in June 2011 and set about establishing a supply chain, logistics team and procurement organisation.

 

“The team has evolved throughout the process starting, on some levels, with just me as one person, introducing a team of around ten people, and having grown into three teams – procurement, logistics and contract management – of close to 150 people,” he says.

 

These individuals have been tasked with the herculean challenge of bringing the Games to life to a very tight deadline.

 

It is undeniable that the implications of shifting a sourcing deadline back by just one day or reducing savings targets due to market volatility have a specific implication on the Olympic committee that they may not have on other organisations. It is rare that a procurement project’s deadline has such high-profile consequences if it is not met.

 

After all, the world is gearing up to the opening ceremony on 5 August and there is physically no room for error. Flights have been booked, tickets have been sold and athletes’ training programmes have been planned in line with the time and day of their competition. To say that the repercussions of missing the deadline would be catastrophic is nothing short of an understatement. There has been intense planning and foundations have been laid over a significant period of time in order to allow the event to be delivered on time.

 

Firstly, Cotrim had to determine the scope of the project and uncover each of the products and processes required. With a general idea of which areas needed to be catered for, the next step was to define the requirements of value creation and the vision of a sustainable supply chain. Then, he spoke to federations, associations and businesses to determine their expectations and opportunities. “We spent two years just developing suppliers through extensive market communications before starting the procurement stage,” he says.

 

It was then time to procure all of these products and services, and source the right suppliers for the job. Lessons learnt from the London 2012 Olympics pointed to a greater need to support the host nation’s local economy by sourcing suppliers and workers within Brazil.

 

“We have people from all over Brazil in our procurement team. I would say the team is roughly made up of 30% Rio locals, 50% locals from other areas of Brazil, and 20% foreigners,” says Cotrim.

The finer details

 

With these strong planning processes in place, it would be easy for the organising committee to rest on its laurels and assume the event will go to plan. Yet, while sourcing and procuring goods to deadline is an obvious challenge, being aware of exactly what needs to be sourced and purchased poses a much greater challenge.

 

Initial thoughts about what to source for an Olympic Games turn to the obvious: building materials for venues; equipment for each specific competition; and bottled water for the athletes. However, there is an endless list of products and services that may not be noticed in their presence but are very noticeable in their absence.

 

Even the obvious need for sports equipment threw up some unexpected challenges. Sourcing guns for the shooting competitions requires specific regulations and licences, as well as highly stringent transparency regarding the wider supply chains of their components.

 

“That is why it was so important for us to have a complete understanding of each competition,” Cotrim says. “If we hadn’t been so comprehensive in the first stage of the process, uncovering the scope of what the project entailed, we would have had more problems.”

 

Further sourcing complications arise when this equipment is livestock. “[Horses] travel in first or business class – they have more requirements than some of the human athletes,” Cotrim says.

 

And aside from their high maintenance demands, cultural differences also come into play when hosting an event involving 206 countries. There are three equestrian Olympic events: jumping; dressage; and eventing, yet this does not mean these events are common to Brazil. In fact, the host nation does not usually have dressage competitions and while you would not expect this to pose much of an issue, an unexpected and rather unusual problem arose.

 

Horses used in dressage events are typically very big and strong, and Cotrim found that horses in Brazil are generally smaller in size and stature, meaning the host nation’s horse boxes would be too small to transport dressage horses travelling from other regions. This meant that locally sourcing horse boxes was out of the question. Instead, Cotrim had to turn to a specialist German company to provide the appropriate transportation.

 

At the ready

 

Failing to expect the unexpected poses one of the biggest challenges to a procurement function built from scratch and delivering a one-off event to a one-time, non-negotiable deadline. Timing becomes constrained and budgets become stretched when faced with having to acquire a product and service you have not anticipated or budgeted for.

 

“In a major event like this, we cannot ensure everything will run smoothly. Things can change quickly, so you always need to have a plan B in place to correct it if something goes wrong,” says Cotrim.

 

This plan B comes in the form of a dedicated emergency procurement function, which Cotrim created specifically to deal with any unexpected surprises in the run-up to the Games.

 

While most of the supply chain function has moved into the contract management stage, a ten-strong emergency procurement team has been put in place to deal with the unexpected.

 

Changes and unexpected costs along the way have in turn led to costs being cut elsewhere in the project. Procurement was tasked with finding and trimming the fat so as to balance the creeping operating expenses.

 

Uproar that cuts would result in athletes not having free air conditioning in their hotel rooms has been laid to rest by Cotrim, who instead argues all cuts are taking place back of house. Reducing the space required for temporary structures and, where possible, adapting existing buildings instead of sourcing temporary buildings has generated savings.

 

However, the Olympics is not just a two-week sports competition for elite athletes, it is also about creating a lasting legacy in the Brazilian community and an exit route for the suppliers and businesses involved in putting together the event. Again, procurement can be seen to be having further-reaching implications than the event itself.

 

“Every single thing we procure needs to have an exit route in place,” says Cotrim. “For example, we bought 10,000 televisions, so we need to put these into the right exit routes, whether it be in an auction or direct sales, and this all needs to be planned before the Games have even started.”

 

These exit routes needed to be put in place prior to the event; running the event to schedule is only one aspect of delivering on time.

 

Nor does the committee’s responsibility for suppliers end at the closing ceremony. All logistics suppliers were enrolled onto a logistics excellence academy programme to provide training that will be useful to them in the post-Games climate.

 

The Olympics may soon be all over for another four years, but if Cotrim and his team manage to pull it off, the impact of the procurement function will be felt far and wide and it will leave a long and lasting effect.

 

Fernando Cotrim is not celebrating too early, however. “To see everything in the right place and the Games running well, knowing that the supply chain has helped to deliver this, will be a proud moment.”

 

 

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GAMES RUN THEIR OWN RACE DESPITE ISSUES

 

Barely a day passes without the media unearthing a new scandal that threatens to hang over the Games. Political and social unrest has plagued Brazil over the past few years and, rightly or wrongly, the Games has become embroiled in these problems.

 

Eleven workers have died in the construction of the venues, while the Lava Jato corruption probe into the Brazilian government has escalated to reach an investigation into alleged corruption in construction contracts.

 

Then, less than three months before the start of the Games, Brazilian president Dilma Rousseff was impeached following months of name-calling and corruption inside the government and protests spilling out into the streets of the favelas. That is not to mention the nation’s plummeting GDP and a public health crisis as the number of suspected cases of the Zika virus increases. Political and social unrest, as well as scandals implicating the Games have led many to question whether Rio is ready for this event.

 

“But this is what the emergency procurement team is in place for, so we are ready to handle these things when they arise,” says logistics director Fernando Cotrim.

 

The Zika virus was an unexpected issue, and this has had a knock-on effect on ticket sales, tourism and general confidence in attending the Games as a spectator or participant. Yet the temperature in Rio at the time of the Games should be lower, reducing the threat of an outbreak of the virus, which is spread by flies. In the event the worst should happen, the emergency procurement team is on standby. Further, Cotrim is “confident that people are able to separate these external political and social issues” from the Olympics.

 

This article is a piece of independent writing by a member of Procurement Leaders’ content team.

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