Dive Brief:

• Sales for merchandise related to the Chicago Cubs is five times higher than the Major League Baseball Average due to the baseball team's success this season, Crain's Chicago Business reports.
• The surge in demand caught certain sports retailers off-guard, however. Sports World Chicago, located across Wrigley Field, recently ran out of stock and is struggling to resupply, Internet Retailer reports. "No we're not closing, we're just catching up," the retailer wrote on its website.
• The seeming unpredictability of sports proves a dilemma for sports retailers who must gamble with expectations to ensure the right product reaches the right market at the right time. The Chicago Tribune provides several examples of retailers suffering last year from overhyped expectations.  

Dive Insight:

In many industries, selling out is a sure sign of success and could be a reason to celebrate. But for the supply chain manager, selling out is a sign of poor forecasting or management.

Sports provide a perfect example of a classic supply chain forecasting problem: balancing the costs of overproducing with the costs of potentially lost sales. In sports, this cost changes on game-by-game basis and the difference in margins become increasingly drastic as teams approach the post-season or championship games.

In the sports world, several actors are constantly engaging with this dilemma: the brand manufacturer must be able to increase its production speed higher than the demand growth rate; while the brand and third-party vendors must be able to keep inventory levels at the rate of demand, or higher.

There is a large external risk involved at each step, however: whether a team will advance in the playoffs or win a title. Yet, producers cannot wait for the outcome, because that is the time of highest demand for the celebratory gear.

Risk modeling becomes extremely important at this stage, as do supplier-vendor relationships.

The first question to address is which company will assume the risk? Many times the answer may depend on the power dynamic between the two parties. In the sports scenarios, the official brand suppliers may have more power than their vendors given the scale of sales, but they are also more likely to take the risk of scaling their supply chain given the added brand and marketing costs of not having the product on-hand. 

If the vendor deals with an unofficial supplier, however, the relationship is a little more complex since both have a lot to lose in both cases. In these cases, models should take into account the scale of the store as well as what costs could be shared between the vendors.