Exceptional Extras, March 2014

The road to Rio

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Efficient, sustainable procurement and supply-chain management may not be the first topics that spring to mind when it comes to Rio 2016, but both are key to Brazil’s approach to the Olympics and what the country expects the event to do for the economy long after the closing ceremonies.

Hosting the Olympic Games is a landmark event for any city, and Rio de Janeiro will be no different in 2016 when it welcomes millions of spectators and athletes. When the International Olympic Committee selected Rio as the venue for the 31st Summer Olympics, Brazil embarked on a project that will inject US$44.1b into its economy and benefit 55 sectors, from construction and communications to education and agriculture.

The challenges for Brazil — and opportunities for potential suppliers to the Olympics — are huge. With the event requiring the procurement of 30 million items in the products and services sector, suppliers, fans and stakeholders are watching with interest to see how the organizers will meet the demand.

Coordinating a mega event of this scale necessitates the creation of a huge supply chain, and finding the best possible suppliers is one of the organizers’ biggest challenges and goals. With sustainability as one of the official pillars of the Olympics, it’s also important the large procurement network created for the event lives on and flourishes after 2016.

“We need to develop the Brazilian supplier market to ensure high quality of products and services for major events, and aim for a whole new level of sustainable practices,” explains Fernando Cotrim, the organizing committee’s Procurement Director. The supply chain involves everything from mapping demand to waste disposal, as well as overseeing material and service agreements — and each of these involves planning, procurement and logistics.

“We have a huge challenge ahead of us: establishing a supply chain for the Olympic and Paralympic Games that must also be solid and sustainable,” says Cotrim. “For this to be accomplished, all suppliers for the Olympics must be prepared to work to the highest standards.”

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At a local and national level, the sectors feeling the biggest impact will be construction, real estate and leasing, oil and gas, information services and transportation. Not surprisingly, there are concerns about how Brazil’s infrastructure will fare.

Local markets struggle to meet even current levels of demand, which is especially pronounced in the areas of industrial laundry, waste collection and treatment, sports flooring and support vessels. The supply of mattresses is another example: the Olympic Village will require 30,000 mattresses — far beyond what the local market can provide.

And the deadline is undeniably tight. In 2014 and 2015 alone, the Olympics’ organizers will need to enter into price negotiations for approximately 80% of the merchandise they purchase.

The complexity of the procurement process is equally tricky. The 30 million items required for the Olympics include a million components for sports equipment and a fleet of cruise ships to host guests.

The organizers will also need about 100,000 sq m of space to store these items. Logistics is another major challenge.

Cargo for the Olympics, including live animals such as horses, will come into Rio from overseas, and organizers are currently searching for a logistics operator with the skills and experience to manage this operation.

For more information on supply chain management, download our Partnering for performance: CFO and the supply chain.

To meet these requirements, the organizers are attempting to improve the capabilities of local businesses — a move that will also help secure the legacy of the event. The organizing committee and its affiliates are seeking possible suppliers in association with the Brazilian Micro and Small Business Support Service.

The aim is to develop the technical and management capabilities of these companies by improving training, visibility and the transfer of knowledge. As a result, this extensive segment of the Brazilian economy will be better positioned to contribute effectively both during the Olympics and beyond, allowing them to benefit more fully from the growing opportunities an emerging market such as Brazil offers.

Sustainability is at the forefront of supply-chain management for both international and local suppliers — being unprepared in this area could prove a serious obstacle. All suppliers participating in bids for the Olympics must understand and follow guidance that aims to prepare the country for the demands of the events.

“We have a huge challenge ahead of us: establishing a supply chain for the Olympic and Paralympic Games that must also be solid and sustainable.”

First used in the London Olympics of 2012, this guidance was jointly prepared by the International Organization for Standardization, alongside agencies from 34 countries, including the Brazilian Association of Technical Standards. Sustainability will be a factor in all decisions relating to suppliers, including costs, quality, deadlines and risks.

“The major legacy in innovation is developing a supply-chain process that takes all these issues into account. It is not a reaction to a legal regulatory process, but an innovation in the management process that seeks to make things more efficient,” says Mario Lima, Executive Director of Sustainability at EY, which is leading a project to assist the organizing committee in Rio by providing advisory and internal audit services.

To put this new model for sustainability in place, EY and Rio 2016 initially defined the procurement categories and established criteria based on major sustainability requirements. Workshops with strategic suppliers will also guarantee more environmental and socially friendly products to the whole supply chain in a collaborative way.

“We must change the perception that sustainable products are more expensive. Although the initial cost may be higher, cost and waste reduction in the value chain could mean a decrease in total cost,” explains Cotrim.

“As such, our decisions will be based on the total cost of the life cycle of materials and services and the value they bring to the project. In addition to ensuring our cost, quality and sustainability requirements are met, we wish to leave a legacy of a more prepared and competitive supplier market.”

Suppliers of all raw materials will need to be able to demonstrate their products come from sustainable sources. Products used at the Olympics will also need to support local suppliers and meet required standards for water use and labor policies.

The organizers still have a ways to go to be ready to meet the supplier requirements of the Olympics. However, the organizing committee is dedicated to making sure the procurement process is open, far-reaching and capable of delivering sustainable results.

This way, the legacy of the Olympics for Brazil’s economy will last far beyond 2016.