Supply Chain x Sports
9 minute read · Issue Number 117 · April 22nd, 2022
As a financial analyst at the stock exchange, one of my goals is to understand macro trends, their impact on diverse industries, and how those effects translate into investment opportunities.
It may sound like it’s about trying to predict the future, but it’s more about understanding how a slight change in A leads to changes in B, C, D, etc.
Today I want to talk about the supply chain crisis and its impact on the sports industry.
Supply Chain Crisis Explained
The supply chain is a system that involves all the logistics, materials, people, and steps that products require before they are ready to reach the consumer.
Everything from sourcing and moving raw materials, manufacture & production, assembly of components, transportation, and delivery are critical phases in a traditional supply chain.
During the last few months, a supply chain ‘hell’ has been unwinding worldwide through product delays, shortages, port buildups, and elevated freight costs.
You may have seen or experienced it yourself – there are fewer products available, and things got more expensive due to the law of supply and demand.
The conflict in Eastern Europe, China’s recent Covid outbreak, and the increase in money supply in the market are some of the main reasons.
For example, China is the largest exporter in the world. Shanghai (a city of over 26 million citizens) is currently in a strict Covid lockdown, delaying production and general exports – as of today, more than 700 ships are waiting to load or discharge outside of Shanghai – the highest it has ever been:
A disturbance in the supply chain reduces product availability, delays deliveries, pushes prices even higher, and limits the purchasing power of lots of people. However, the effects on things like this aren’t immediate – it will take time for us to notice and experience the further implications.
Looking at the sports industry, how would you think this plays out? Who’ll most likely be affected? Who benefits?
Supply Chain x Sports
Two questions are relevant to ask here:
What companies source their products/goods from China/Russia/Ukraine?
To what extent are they exposed to these countries?
In the sports industry, the most vulnerable sectors are those whose tangible products make up most of their business model. For instance, a company like Nike (which produces and sells apparel) will be more affected by supply chain issues than a company like Bleacher Report (which delivers news and digital content).
So what companies are likely to be affected by the supply chain crisis?
Companies in the retail (merch), apparel, and equipment sectors. Foot Locker, Nike, Adidas, Puma, Lululemon, Dicks Sporting Goods, Under Armour, etc.
Here’s what some of their 6-month graphs look like:
Can you see the trend here?
Some companies may not be as exposed to or sourced from the countries mentioned above, but they are affected due to the macro effect (i.e., overall changes in supply, demand, and price levels in the market).
And who benefits?
When companies face adversity in their supply chains, they quickly look for alternatives to keep up with production.
Hence, smaller or alternative countries, companies, and other stakeholders along the supply chain will likely benefit from this shift.
If a huge company can’t get its products in China, it will turn to similar providers in emerging economies in Asia, Africa, or Latin America.
However, changing the whole system is complex, costly, and inefficient as well – hence, those companies exposed to the supply chain crisis will continue to get hurt as long as this crisis prevails.
Supply Chain Apocalypse – a great article by Sahil Bloom that goes into detail on the different causes and theories behind the current situation
How Our Online Shopping Obsession Choked the Supply Chain – Christopher Mims on the historic pandemic shopping spree and how close we are to robots delivering our sneakers.
🎙 Halftime Snacks Podcast
Adam is the CEO and founder of Front Office Sports.
FOS is the leading media brand covering the business of sports and reaching millions of business professionals through its newsletters, social media channels, courses, podcasts, and exclusive content.
We discussed the beginnings of FOS and Adam’s process, vision, and mindset for building a brand in sports media. We then learn more about FOS’s growth stage, challenges around hiring the right people, setting the culture, creating a reputation through content, and different perspectives on the future for media and FOS.
Apply to be a guest on the Halftime Snacks Podcast here.